Training and competence - Small mortgage and financial adviser firms
Related information
Industry Training regularly offer training to support the industry.
This page focuses on training and competence (T&C) arrangements within small mortgage and financial adviser firms. It is designed to pass on examples of practices we have found which we hope will be useful for you to refer to and apply to your business so, together, we can raise the standards across the industry. This page is not intended to direct firms to a specific course of action and are not a comprehensive list of all methods used to comply with the T&C requirements.
Appropriate training and assessment should be undertaken so that employees acquire the relevant knowledge and skills (and know how to apply them) to fulfil their role within your firm. We have carried out various reviews and have assessed T&C in different types of firms. By demonstrating good and bad practice we can provide examples of areas that can be considered when developing T&C processes for your employees.
Employee assessments
During our reviews, we found that, some firms assessed the gaps in employees' skills and knowledge at recruitment or an early stage and put in place an appropriate plan to fill those gaps. Methods included formal testing, one-to-one assessments and role plays. Firms also focused on specific information such as the firm's systems and procedures, as well as knowledge of regulated activities and products sold.
Every firm is different and will apply a range of criteria. The important thing is to ensure that, whatever method of assessing competence is used, it is relevant to your employees, their knowledge, skills and to the activities they are involved in.
T&C plans
Some firms set out their T&C arrangements in a written plan covering key elements such as roles and responsibilities within the firm, training and assessment of competence of employees, supervision and monitoring arrangements, continuing professional development (CPD) and record keeping. Written plans can allow employees to understand how the firm's T&C arrangements apply to their role.
Any such plan should be reviewed on a regular basis to ensure it remains up to date and appropriate to your firm and employees. They don't have to be lengthy – some plans we saw adequately described the firm's T&C arrangements in under two pages.
Firms must always make and retain records to demonstrate what has been done to comply with T&C requirements. Records must be retained for at least three years after an employee ceases an activity to comply with FSA rules, except for records of pension transfer specialists which must be retained indefinitely. Firms' record keeping should demonstrate and confirm the systems and controls they have in place.
Supervisors
Supervisors of employees advising private customers on packaged products must pass an appropriate examination and have the technical knowledge and coaching and assessment skills to act as a supervisor. The T&C rules do not require supervisors of mortgage advisers to be qualified. However, those overseeing non-advised sales of lifetime mortgages (and also those designing scripted questions for use in non-advised sales of lifetime mortgages) do need to pass an appropriate exam as part of becoming competent. The examination requirements and transitional arrangements are detailed fully in our Frequently Asked Questions. In all cases, a firm must take reasonable care to establish and maintain systems and controls that are appropriate to its business and ensure supervisors are competent for the role they perform, maintaining appropriate records which demonstrate this.
Employees should be competent for the work they do
Firms must ensure all employees under supervision pass an appropriate examination for the role being undertaken. Where there is an examination requirement, firms may wish to impose limits on the time they allow their employees to pass an appropriate examination or place limits on the number of times the examination can be taken.
Some mortgage firms we visited allowed employees to provide advice on a supervised basis before passing the relevant regulatory module. As stated above, our rules do not allow this.
As well as ensuring employees pass each module of an appropriate exam, your assessments should ensure that they are competent to apply the knowledge and skills necessary to carry out the activity without being supervised.
Employees should be appropriately supervised
Firms should ensure those employees not assessed as competent are supervised appropriately. Firms often ask us what level is appropriate. This depends on the knowledge and skills of the employee and firms should tailor supervision accordingly. Activities typically involved:
- one to one coaching and role-play scenarios to see whether an employee could apply their knowledge to specific client needs;
- observation of the employee when giving advice to a customer to assess their knowledge and skills, helping the firm to decide whether the employee should see clients on an unaccompanied basis;
- assessment in key performance areas; and,
- provision of formal training with some firms assessing employees on their understanding of this training.
Employees should have their competence regularly reviewed
Firms are responsible for ensuring an employee's continuing competence. Appropriate arrangements must be in place to monitor areas such as their technical knowledge, skills and also changes in the market, products, legislation and regulation. Firms visited used various methods to demonstrate how competence was being maintained. Examples included:
- Continuing professional development, including reading the trade press, attendance at roadshows and industry training events and reviewing information on the FSA website such as newsletters. Many firms placed emphasis on the quality of CPD rather than quantity.
- Evidence of file checking. The frequency of file checking was set by the firm, based on the employee's knowledge, skills and business written.
- Use of compliance Key Performance Indicators (KPIs) to assess employees' performance against the firm's standards. KPIs often covered areas such as persistency, complaints, compliance monitoring and standards of fact find completion to give an indication of the quality of advice provided and of the records created.
- Regular assessments in order to monitor employees' continuing competence, e.g. product knowledge tests, use of internal systems and procedures and accompanied calls.
Monitoring for sole traders
A sole trader should be able to prove that he has complied with the monitoring requirements set out in the rules. They should make whatever arrangements are appropriate in the circumstances, as it can be difficult to be objective about one's own performance. Some sole traders we visited had someone independent such as a compliance consultant to do periodic monitoring. Others used alternative organisations and institutes to provide assistance in this area. Many sole traders had also undertaken and recorded an appropriate programme of continuing professional development to ensure the ongoing quality of their work.
Monitoring for partners and directors
Some firms allowed their partners and directors to monitor themselves. Self monitoring is not permitted under training and competence rules, where there is another partner or director who can monitor their fellow partner or director. Sole partners or directors can monitor themselves – the same principles apply as for sole traders monitoring themselves (see above).
Summary of practices we observed which firms can consider
| Recruitment |
|---|
| Credit Checks, appropriate referencing and exam certificates on file. |
| An understanding of the new recruit's previous advice areas. |
| Product knowledge testing on those products frequently used. |
| Assessment of the new employees understanding on firm-specific knowledge, for example your firm's systems and procedures. |
| Level of supervision prior to competence |
| Regularly documented one to one assessments. |
| One-to-one coaching using role-play scenarios and observed client interviews. |
| An appropriate level of file checking until competence has been attained. |
| Employee competence regularly reviewed |
| Ongoing development plan to address skills and knowledge needs. |
| Evidence of file-checking, your firm should decide how often this needs to be done. |
| Use of Key Performance Indicators to assess an employee's performance against your firm's standards, measured on a regular basis. Some firms we saw used this to identify potential risks to the firm. |
| CPD activity with emphasis on quality rather than quantity. |
| Annual fit and proper tests, such as credit checks. |
| Regular one to one meetings. |
This summary of practices above is not exhaustive of the methods that firms can use in each area.