Regulatory exams: Ready… Fire! Aim!

01 June 2011 Paul Kruger, Moonstone

When one listens to the feedback from candidates who actually wrote the regulatory examinations it becomes evident that the “Ready… Fire! Aim!” strategy was employed by many of those who were unsuccessful at the first attempt.

This opening comment is not meant as criticism against those who failed, but rather as a reflection of the myriad of conflicting pieces of information bandied about in the marketplace. Until the Financial Services Board (FSB) published its comprehensive preparatory guide to the regulatory examinations, many candidates were totally unsure of how to approach the examinations.

Prepare to meet thy Invigilator

Whilst many product houses took steps to encourage both tied agents and contracted brokers to start studying, this coincided with the introduction of legislation aimed at curbing the creation of conflict of interest (COI). The fact that COI is outcomes based, rather than rules driven, created uncertainty in the industry as to what would be acceptable, resulting in a wait-and-see attitude.

The majority of product houses who took positive steps to assist intermediaries to prepare for the examinations arranged scheduled training, either via outsourced providers or through the use of internal expertise. This saw a huge increase in the number of examination registrations from the beginning of May, which will hopefully enable the regulator to publish results reflecting the pass rate of a representative sample.

Fable or fact?

There is wide speculation in the industry about what the possible success rate is, and many commentators express opinions on hearsay. The only body with access to all the statistics is the FSB, and until they make a formal announcement, whatever is published can only be guess work.

At Moonstone we saw a very high pass mark originally, which then dipped rather sharply, only to start recovering again from March onwards. What happened?

The relatively low number of examinations written makes it difficult to make reliable deductions, but one can safely say that the initial examinees - many of whom were compliance officers and training service providers - were possibly quite knowledgeable. The second wave consisted of people who were keen on getting the examinations behind them, but who had underestimated the complexity of the exercise. As word spread, and people started realising the need for proper preparation, we saw the success curve turning upwards again as the number of better prepared candidates increased.

Mixed reactions

Reaction in the industry media consisted of both positive and negative comments. One observer, reflecting on reader responses to an article in FAnews Online, remarked that all the positive comments came from those who passed and the negative ones from those who did not.

While this sounds simplistic, it does point to a change in attitude to the examinations. Successful candidates tend to express a far more positive opinion of the regulatory examinations. Those who failed, and those who still have to write, tend to be more questioning about the need for the examinations.

Voice of experience

One common objection is that people tend to question the reasoning behind them having to write the examinations, given their experience in the industry. While this may have substance concerning the level 2 regulatory examinations, it should be borne in mind that the FAIS Act, which makes up the bulk of the level 1 examinations, only came into effect at the end of September 2004.

One of the main reasons for the regulatory examinations coming into being is, in fact, that many financial service providers displayed ignorance about the requirements of the act, the general code of conduct and other related legislation. This was gleaned from actual visits by the FSB to advisor practices, and responses to, or the lack thereof, to regulatory requirements like the annual compliance reports.

In the interim, a number of other matters surfaced, including learning material and language issues, which tended to take the focus off the examinations itself. Whilst these are very valid concerns, the regulator did caution candidates not allow it to interfere with their preparations for the examinations.

Setting your sights

What has become very apparent is that successful completion of the regulatory examinations will be far more than just the passing of another test; it will indeed confirm the status and ability of the advisor as a professional.

But to hit the target you need to get your ducks in a row - and in the right order: get ready, then aim, then fire!

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