Online register of qualified advisers will improve accountability, writes Laura Slattery

Most consumers know that SSIAs are a good thing, pensions are dull but necessary and car insurance can often cost more than the car itself.

But ask random passers-by to explain the concept of ETFs, Reits, PRSAs or NCBs, or explain the difference between mortgage protection and payment protection, and your question will be met with perplexed, furrowed brows and blank expressions.

In this vacuum of knowledge about money matters, a competent, honest and qualified financial adviser can thrive.

But how can consumers know that the person giving them financial advice isn't just dropping acronyms into their sales spiel because they sound impressive?

How can they be sure that the person on the other side of the mahogany desk knows anything more about, say, the tax consequences of becoming a buy-to-let property investor than they already do themselves?

And even if advisers, insurance company sales agents and bank employees do know their stuff, how can consumers know if they have the scruples to give them fair, impartial information rather than try to rack up their own commission or to meet company targets by foisting unsuitable financial products on them?

This week saw the launch of an online register of qualified financial advisers, (QFAs).

At www.qfaboard.ie, consumers can check that the person giving them financial advice has the QFA diploma.

The names of about 6,000 people are already on the register, according to Bill Hannan, chairman of the QFA Board.

The QFA qualification, which was first introduced three years ago, is the result of a merger of the Institute of Bankers certificate in investment advice, the Insurance Institute of Ireland's financial planning certificate and the associateship qualification from the LIA, a training body for the industry.

The QFA is the only professional qualification named by the Irish Financial Services Regulatory Authority as meeting all of its new minimum competency requirements for every category of retail financial products, although in order to sell general insurance policies, QFA holders must sit a bridge examination.

"Up to now, there has been no mandatory requirement to hold a qualification," says Hannan.

A full list of the recognised qualifications is contained in the appendix to the financial regulator's minimum competency requirements, available at www.itsyourmoney.ie, in case consumers want to check what the letters after their adviser's name actually mean.

The financial regulator's minimum competency requirements will be mandatory from January 1st next year.

The financial regulator has given new entrants and people with less than four years' experience a period of four years to obtain a recognised qualification in relation to their area of the financial services.

According to Hannan, completing the modules and sitting the six exams that make up the QFA diploma would take an average of two years for someone who is working full-time and studying part-time.

The course is broken down into six modules - life assurance, pensions, investments, loans, regulation and financial planning - and QFAs must undertake a continuous professional development programme.

"The course is an evolving one because the industry is an evolving one," says Hannan.

"A lot does change. Every finance bill or social welfare bill or budget has things in it that advisers need to know."

But the new minimum competency rules won't apply to everyone.

Anyone who has sold and provided advice on retail financial products for four of the past eight years will be "grandfathered" and won't have to acquire the QFA diploma in order to carry on with their business.

Banks and insurance companies sell high volumes of products through their network of call centres, which typically have a high turnover of staff, who will ask questions and give details on the product by following a prescribed script.

These employees will not be required to have any qualifications, although the financial regulator has specified that they must be given an appropriate level of ongoing training and that the person who devises the script - or acceptance criteria - has accreditation.

The financial regulator's consumer director, Mary O'Dea, says she expects financial services firms to interpret the minimum competency requirements "in a reasonable and practical manner".

Although the requirements are set up so they can develop alongside future market developments, O'Dea says the regulator is hoping to avoid making any material changes to the competency rules over the next three years.

But the regulator will undertake a review of the financial intermediary market next year. Under this review, it will consider changing the way in which it currently categorises brokers.

At the moment, brokers can have one of three types of authorisation from the regulator.

They can be authorised as tied agents, which means they only act for one company.

They can also be multi-agency intermediaries, who will provide advice on the range of companies with which they hold written agencies. These agency appointments should be clearly displayed on the broker's premises, the idea being that consumers can satisfy themselves that the broker is giving advice on a sufficiently wide cross-selection of products.

Finally, brokers can be authorised advisers, who should be able to give their clients advice on the full range of financial products available on the market.

But these terms are confusing for consumers, the regulator's chief executive Patrick Neary said last week, much to the relief of the two bodies that represent brokers - the Professional Insurance Brokers' Association (Piba) and the Irish Brokers' Association (IBA).

"Obviously, if consumers are dealing with a tied agent, the information they are given is going to be limited," says Pat O'Sullivan, director of financial services at the IBA.

"If someone walks into a bank and wants to buy life assurance and the bank employee says we are tied to a particular company for life and pensions products, they don't understand that they are waiving their right to choice," says O'Sullivan.

"Impartiality, choice and independence are out the window."

But O'Sullivan doesn't believe that people understand this, or even think about it for too long. "I don't think consumers know to ask the right questions."

Although many brokers refer to themselves as independent financial advisers, there are various states of independence.

Most brokers fall into the category of multi-agency intermediary, which means there will always be companies and products that they won't advise on. For example, Quinn Direct does not sell motor or home insurance through brokers, meaning consumers shouldn't be surprised if a multi-agency intermediary never mentions their existence.

Most brokers also accept commissions from the companies whose products they recommend, rather than charge an upfront fee.

"Commissions should be covered in the terms of business that brokers must give consumers," says O'Sullivan.

Although some independent financial advisers do give people a choice between paying a fee for their advice and letting the broker be paid by commission, most consumers are happy to agree to the commission system. Paying for something upfront is naturally unpopular, says O'Sullivan.

But not all financial institutions pay the same rate of commission. Unethical brokers more interested in their own bank balance could recommend a product that is poor value for the consumer, but a nice little earner for them.

The risk that consumers might be recommended the wrong product for the wrong reasons was exasperated in recent years by the behaviour of some insurance companies who threatened to cancel the agencies of smaller brokers who didn't direct enough business their way.

These pressure tactics have now ceased, according to Piba chief executive Diarmuid Kelly - in the insurance industry, at least.

Mortgage lenders, Kelly adds, have threatened to cut off brokers and refuse to pay them threshold-based commissions, prompting Piba to set up Piba Mortgage Services.

Some 500 Piba members have signed up to the wholesale mortgage company, which will pay brokers a single commission rate on all loans, regardless of the lender or the volume of business, retaining a portion of the commission to cover its costs.

The service is one example of how brokers have joined forces in order to reduce their overheads and continue offering independent financial advice.

Intermediaries are one of the most heavily regulated professions, according to O'Sullivan.

For the past five years, all brokers must fill out a written "factfind" outlining the client's financial objectives, investment experience and other facts about the client's financial position. The financial adviser must also write a "reason why" letter to the client explaining why a particular transaction is in their best interests.

Under the regulator's consumer protection code, these rules will now be extended to the direct sales forces of banks, insurance companies and other financial services firms, unless they are selling "basic banking products".

The code helps bring about a level playing field in the industry and is good news for consumers, according to O'Sullivan.

Both O'Sullivan and Kelly also broadly welcome the introduction of the minimum competency requirements.

But while the letters QFA might indicate that someone has a competent grasp of the financial services world, they cannot guarantee honesty.

Aggrieved consumers who believe they have been mis-sold a financial product, either from a bank, insurance company or broker, will have to take any unresolved complaints to the financial services ombudsman.

But the catch-22 is that the complaint must be about a regulated firm. Consumers can check the authorised status of a firm by ringing the regulator on lo-call 1890-200469. Con artists, fraudsters and hustlers are a matter for the Garda.