A survey, recently completed by the recruitment firm IC Select, found that 48% of investment consultants do not have a professional qualification. The survey covered 505 investment consultants, 323 of these were lead investment consultants and 188 were investment consultants acting in a support role or consultants where we did not have information on their role. Amongst the lead consultants, 39% had no professional qualification with 60% of those in support roles currently unqualified.

The definition of what is accepted as a professional qualification varied between firms. Some firms defined it as being either a qualified actuary, a Chartered Financial Analyst (CFA) or someone holding a masters degree or doctorate in finance, whilst at other firms, representing 60% of the survey, the definition also included personnel with the Investment Management Certificate (IMC), the basic competency certificate for investment managers generally completed before undertaking professional examinations. (IC Select Nov 2012)

IFA‘s may be surprised by this as they are only able to practice by the FSA, once they can demonstrate professional competence through a stringent series of qualifications.

There has been little overlap between the world of institutional and retail investment advice, but this is changing. As with so much else in pensions, the Tsunami of money that will pour into DC plans as a result of auto-enrolment will force change.

If you read the announcements of the Regulator on DC default design , emphasis is on words like “suitable and appropriate”.

What is suitable and appropriate for people in general or specific workforces may not be quite the same. We’ve a lot to learn about the circumstances of people as reach retirement. Those who have the money, energy and perhaps advice to manage their investments to produce an income stream will have different needs to those who don’t.

Investment consultants need increasingly to be qualified in issues to do with personal rather than corporate risk. IFAs have much to teach “investment professionals” and their investment course and qualifications should be at the very least “of interest” to investment consultants.

There seems some reluctance in investment circles about having to get involved in the application of their science in “retail”. But this individual risk reverts to corporate risk when a corporate cannot retire its workforce because of the failure of the pension to provide an “adequate replacement ratio”. The failure cannot be  attributed to poor investment consultancy, more to an absence of investment consultancy where it matters!

So I’d like to see investment consultants getting down and dirty and educate themselves both in the theory of behavioural finance and its application!

Related articles

• Are you young and scared to invest? (fidelity.com)
• How To Find A Financial Professional (moneymanager.com)
• The CFA Institute is launching a new exam, which will have a 60-75% pass rate (news.efinancialcareers.com)
• My investments have crashed: can I claim compensation from my IFA? (confused.com)
• Why the DC “game is up” for the active fund managers (henrytapper.com)