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The future of Level 2 REs and CPD – July 2017

A recent “Round Table” discussion by Ms Caroline da Silva, Deputy Registrar, FAIS of the FSB, provided a welcome update on the Regulator’s current thinking on a number of key issues, including:

  • Regulatory exams
  • Continuous Professional Development
  • Training

Level 1 and 2 Regulatory Exams
Those who did not bother to read the full article published in Media24 may have come to wrong conclusion regarding the future of the current level 1 REs. Everything is going ahead exactly as it currently stands. The only probable changes relate to what we always regarded as unnecessary duplication, i.e. key individuals and sole proprietors having to pass both the RE 1 and RE 5 (rep’s exam).

As far back as 2013 the FSB placed the proposed level 2 REs on ice. It subsequently became evident that there would be substantial changes made to what was originally intended. This became even more evident as lessons were learnt from the level 1 REs. One of the game changers was the cost and complexity of managing, maintaining, updating and quality assuring of examinations and infrastructure. If this was a problem as far as the four level 1 REs are concerned (RE1, 3, 4 and 5), imagine the impact of 26 level 2 REs.

The new “level 2” requirements
The current thinking is to introduce both a “Class of Business” as well as a “Product Training” to ensure that advisers are equipped to provide clients with sufficient information to make an informed decision.

Class of business refers to a specific licence category, e.g. short-term personal lines, while product training would focus on the specific construction of a specific provider’s product. One would presume that this would include accreditation by the product provider, particularly in the case of more complex products, such as those listed in the Tier 1 category.

The following people will be exempted from class of business training:

  • Reps & KIs – funeral assistance business
  • Cat I Reps – Tier 2 products
  • Cat I Reps – Execution of sales – all products

The “Execution of sales” referred to above is a contentious issue which still forms part of the current discussion of new Fit and Proper requirements, and will be expanded on in a later article.

A very important aspect of the proposed new level 2 exams is that employers and FSPs will be responsible for compliance, monitoring and reporting on training.

Grandfathering introduced
A most welcome consideration will be recognition of prior learning for established advisers when it comes to Class of business and Product training.

The proposed class of business and product specific training requirements will ONLY apply to NEW ENTRANTS and persons still working under SUPERVISION. This means that “grandfathering” will apply to persons that are already in the industry which essentially means that everyone that is currently in the industry will not be required to:

  • Do class of business training through an accredited training provider;
  • Do product specific training in respect of the products that they are currently rendering services for UNLESS where the product has undergone significant product changes and the persons must be upskilled on those particular changes – this is the usual business practice in any case and will therefore not have any significant impact on what is currently happing in the industry.

Continuous Professional Development (CPD)
The purpose of CPD is to ensure that advisers maintain the required competence to render financial services in line with required standards.

The FSP will be required to establish and maintain:

  • policies on how to maintain, update and develop new knowledge and skills
  • training plans to ensure CPD is relevant and appropriate and
  • record keeping of CPD hours and evidence of activities

Different standards and/or exemptions will apply, depending on the complexity of products one advises on.

Please just bear in mind that all of the above are still PROPOSALS, and still subject to change. This applies particularly to CPD, where unscrupulous training providers have in the past used this as a means to get people to sign up for training by offering CPD points as an incentive.

Although CPD was a requirement since 2008, a general exemption still applies, except for those who underwent training on a voluntary basis or where they were members of professional bodies where this is a compulsory requirement.

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