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Benchmarking the Level 5 New Zealand Certificate in Financial Services with other regulated industries

The financial services industry has had a mixed response to the introduction of national qualifications in 2010. Uptake of Level 5 training has predominantly been in the AFA space because, of course, a minimum education requirement is mandatory. However, it is becoming increasingly difficult for RFAs to avoid skilling-up as the regulatory environment becomes more demanding and client expectations become more sophisticated.

While many are baulking at the prospect of study, in reality, the proposed financial services regulatory expectations are not as onerous for financial services as those experienced in some other sectors. Compare financial services with the regulatory demands on electricians, nurses, and builders; it could be argued the industry continues to get off somewhat lightly.

Comparing Level 5 with minimum qualifications in other industries

Generally systemic failures in any industry result in more regulation and a spotlight on industry qualifications. As an example, for the construction industry, it was ‘leaky buildings’. Now, most residential building or renovation work can only be supervised by a Licensed Building Practitioner, impacting on carpenters, roofers, external plasterers, brick and block-layers as well as foundations specialists. These are all trades that previously relied solely on Level 4 apprenticeships, or in some cases had people getting by completely unqualified.

For the financial services industry it was the GFC and the collapse of the finance companies in New Zealand. Despite the demonstrated potential for severe financial consequences if people are badly advised, it is only now that a minimum standard of education is proposed for all advisers. 

The NZ Certificate in Financial Services is a sub-degree qualification designed as an entry level credential for the industry. It carries up to 75 credits on the National Qualifications Framework and its stranded structure enables students to graduate in a particular specialty, and study for additional strands as they progress through their career. It is (currently) a minimum competency for AFAs and can be used as proof of skills and knowledge in a number of different roles. The content covers specialised legislation and regulatory requirements, as well as practical skills; putting it squarely into the camp of being a vocational qualification.

So how does this qualification compare with other vocational qualifications at a similar level? Consider the table following, comparing financial adviser training requirements, with those of electricians, builders, plumbers and nurses.

Vocational Occupational Comparisons

Occupation Group Entry Level Qualification Credits Regulatory Requirement Mandatory to Practice Legally Periodic Re-sits, Audits or CPD Required Time to Achieve
Financial Services Level 5 NZ Certificate in Financial Services 60-65 None Only for AFAs at present (who need an additional 30 credits) Only for AFAs at present 6 months
Electrician Level 4 NZ Certificate in Electrical Theory and Practice 250 Electrical Workers Registration Board Exams Yes Yes 4 years
Building and Construction Level 4 NZ Certificate in Carpentry 320 Licensed Building Practitioner Certificate Yes Yes 4 years
Plumbers Level 4 NZ Certificate in Plumbing 249 Registration with Plumbers, Gasfitters and Drainlayers Board Yes Yes 4 years
Nurses Level 5 Diploma in Enrolled Nursing 180 Registration with Nursing Council of NZ Yes Yes 3 years

Most advisers would consider their role to be more ‘professional’ than ‘vocational’. A quick comparison with what is required by some other professions is below:

Professional Occupational Comparisons

Occupational Group Entry Level Qualification Regulatory Requirement Mandatory to Practice Legally Periodic Resits, Audits or CPD Required Time to Achieve
Chartered Accountant Minimum of 3-year Bachelor degree Professional exams after three years’ experience and undertaking further training Yes Yes 3 years for degree plus further 3 years
Lawyer Minimum of 4-year Bachelor degree Professional legal studies post-degree and sitting of a bar exam Yes Yes 4 years plus
Immigration Adviser One year under graduate diploma Must work minimum of 2 years under supervision before full licence Yes Yes 1 year plus further 2 years

In addition all the professions listed above (and the vocational trades) have licensing costs (or the equivalent) and minimum CPD requirements. It starts to look like financial advisers actually have it pretty easy!

The financial services sector has the benefit of a vocational qualification that does not require an extended period of on-job practice like a trade. Neither does it require people to invest in a three year full-time degree before even starting on a career in the sector. If the industry continues to fight against qualifications, political pressure may result in a more draconian system of licensing with increased restrictions on how advisers operate.

Advantages of the Level 5 Certificate

Having the Level 5 New Zealand Certificate as the accepted baseline qualification for the financial services sector actually has its advantages. The content of the qualification was the result of industry consultation, trying to make it as close as possible to the ‘real world’. Bringing industry experience to a qualification enables the possibility of using real work situations as evidence of competence. Assignments can be authentic because they are based on genuine cases, and new entrants can be managed by using simulated examples.

Importantly, the qualification can be obtained in a relatively short time without people having to take a lot of time out from work. Furthermore it focuses right on the areas where one would want to see improvement; good practice, regulatory requirements and fiduciary duties.

Strategi Institute has been impressed to see the number of younger advisers choosing to put themselves through the Level 5 qualification. These are people who have done some thinking about what they want to do in life and are committed to entering the industry. They are attracted to the fact that the qualification has a strong link to jobs and may open the door to a meaningful career.

Having established that the Level 5 New Zealand certificate has some merits as a credential in the industry, it is also important to look at other potential qualifications. Just as we want people coming into the industry and being benchmarked at level 5, there also needs to be somewhere to go as people become more specialised or senior in their responsibilities. This is where the work being done on a degree level qualification at Massey is an important part of the bigger picture. There needs to be a well-accepted qualification pathway.

Safeguarding business in a regulated environment

For those considering the upcoming regulatory changes and how they can operate as a licensed financial advice provider, training is something that can be easily looked for in a company’s policies and procedures.

In the New Zealand financial services industry it is common for regulatory requirements to be “principle based”. This avoids lengthy prescriptive rules, and gives the regulator more flexibility in how it responds to any issues that might arise. The difficulty for the organisation or individual operating under such a regime is that there is a need to establish demonstrable processes and good intent if anything goes wrong. This is where well written policies and procedures can help a business, particularly when it can show it has done its best to ensure people are properly trained and competent.

For the individual adviser, being able to demonstrate that they have the basic competencies necessary for the job puts them in a stronger position. Having the qualification is evidence of competence and good intent. Graduates will have been introduced to the regulatory requirements of their industry, they will understand their obligations to their clients and they will have a good grounding in the skills and knowledge required for their role. In the much less likely scenario of something going wrong, they will be able to answer positively one of the first questions the regulator may ask:

 “Was the adviser concerned properly trained?”