Paul Anderson considers PIA's training and competence
In January 1998, the PIA finally issued new
Training and Competence ("T&C") guidance to supersede that issued
in July 1995. The document contains detailed information and a
number of case studies which firms may find useful when considering
how best they can meet the PIA's requirements.
The three T&C regimes
The guidance specifies that a firm will fall into
one of three categories, and will therefore require one of three
types of T&C regime. Which regime they fall into depends upon how
many Designated Individuals they have. A Designated Individual is a
financial adviser who either:
- Manages investments with discretion.
- Gives financial advice to customers about entering into
- Takes responsibility for the handling of client money or other
Firms with no Designated Individuals
These are expected to have in place a "programme".
This is a series of T&C activities designed to ensure that a firm
meets SIB Principle 9, covering internal organisation. This means
that employees must understand the requirement that a firm is
properly organised, keeps proper records, and follows well-defined
Firms with fewer than 10 Designated
These are described as "small firms" and are
required to have in place a "plan" which should be included as part
of their compliance procedures. The plan will require the firm to
document the T&C arrangements which they undertake in order to show
PIA that they have thought about which of their employees need
training in which areas, but the plan does not need to be a formal
set of written procedures which are agreed before the year starts
and are then carried through that period.
The plan should make it clear who is responsible
for implementing it, how it fits in with compliance at a firm in
general, and how a firm monitors the effectiveness of its T&C plan.
For example, they could use Key Performance Indicators such as
checking fact finds, not taken-ups, persistency rates, complaints
and so on. This is because firms will need to show PIA that their
training has been aimed at the requirements of particular
individuals, rather than simply keeping the employees up to date
with industry developments in general.
Firms with 10 or more Designated
These are required to have in place "procedures",
which must be written prior to the training being undertaken so
that PIA can see the logic which a firm has used when deciding who
it will train in what. The procedures would have to cover the full
range of training and continuing professional development
Competent Designated Individuals
A firm can appoint someone a Designated Individual,
but they have to go through a two stage process before they can be
deemed to be a Competent Designated Individual. In order to make
this progress, a firm will need to design a programme to enable its
employees to undertake competently the full range of activities at
that particular firm, not just within the industry in general. For
example, even if an external recruit comes from a firm's equivalent
competitor, they will still need to be trained about their new
firm's service standards, compliance procedures, administration
arrangements, computer systems and customer base. Every new entrant
will need some retraining, and the PIA will expect to see a course
designed to fill in the gaps which Designated Individuals may have
in their knowledge. The starkest example of this would be if an IFA
recruited a former tied agent. Until such a new recruit has been
retrained, they would not be allowed to conduct investment
As well as checking that employees have relevant
firm-specific knowledge, firms will also have to check that they
have relevant qualifications and give appropriate advice. Only when
they are satisfied that an employee has passed these tests will
they have completed "stage 1".
The process of passing "stage 2" is mainly
concerned with checking and fine tuning on-the-job performance.
This field monitoring is essential to ensure that, not only do
employees have the relevant knowledge, but that they can apply it
correctly. Only when a firm is satisfied that this is the case can
it pass an employee through stage 2 and designate them a Competent
Even in relation to such an individual, a firm will
need to ensure that it has in place an effective continuing
professional development programme which is aimed both at market
developments in general and at that individual's specific
weaknesses in order to be able to demonstrate to PIA that such a
person has correctly been allowed to continue carrying on
investment business with the Competent Designated Individual label.
In particular, the PIA will want to see the quality, not the
quantity of CPD undertaken, and to see that such attendance is
tailored to particular individuals, not the mass of employees.
In order for a firm to carry out such a training
and competence regime effectively, they will need to have
supervisors who are capable of deeming persons to be Competent
Designated Individuals, and carry out all the other training tasks.
Therefore, the supervisors themselves will need to be specifically
trained for the three main tasks which they will have to undertake,
In order to undertake these tasks, expert on-going
development is essential both in relation to the direct supervision
of non-Competent Designated Individuals, and the continuing
supervision of Competent Designated Individuals.
The PIA sees training and competence as essential
both to protect the public and to maintain confidence in the
industry. It is clear from their initiative on Pension Transfer
Specialists (see FS Brief 28, page 18) that the PIA are prepared to
look at specific areas as well as the industry in general, and
further developments in relation to training and competence are to
One message which comes across very clearly from
the case studies in the T&C guidance is that, if the training
programme / plan / procedures are not recorded in writing, then as
far as PIA is concerned they may as well not have happened. Each
firm will need to ensure that their training and competence regime
and attendance at CPD courses are carefully documented. The PIA
will be looking for a focus and quality to training, not just the
Firms will need to take training and competence as
seriously as any other part of their compliance activity.