Jan 10 2006 Alex Davidson
The proposal to make wholesale exams voluntary, which the Financial Services Authority aired in consultation paper 05/10, has triggered a training revolution ahead of the regulator's final decision later this month. The industry is now focusing more than ever on flexibility and relevance through a restructuring of traditional exam syllabuses and the development of e-learning as a supplementary training method, officials said. The feedback on the training issue in CP05/10 has included a variety of views, but all are aware that training cannot afford to rest on its laurels. The major underlying concern is, of course, to retain competence — but if wholesale exams were no longer mandatory, the resulting standards would not yet be clear.
They will perhaps become so post CP05/10 but everybody has agreed that, whatever the FSA will have decided, exams will not go away — at least for a long time. Nobody disputes that a test under examination conditions, set, invigilated and marked in the traditional way, creates a benchmark in a way that other approaches — often cheaper, more flexible and more convenient — cannot yet match. The extent to which traditional exam-based training would thrive in a post-CP05/10 environment, void of mandatory wholesale exams, may depend on two points: how far any alternatives will meet the regulator's competence requirements; and how relevant the exam syllabuses are.
Competence requirements
If wholesale exams become no longer mandatory, the yardstick for competence is as yet woolly. It is likely to be resolved only by trial and error, if at all, according to regulatory consultants. Many firms have said they would continue to put staff through exams as the only proven objective standard.
Customised courses through e-learning are gaining market share. They can build in their own tests and recordkeeping. The process of doing these tests may not be subject to intense vigilation standards, although randomised question banks make cheating more difficult. Trainers say that e-learning courses cannot be information-intensive like traditional training required for an exam syllabus and so the comparison is not always one of "apples against apples". As a method of delivery, however, e-learning has greater adaptability and customisation potential than classroom training, according to one trainer. E-learning can be presented as a standard package, customised, or written exclusively for a customer firm's requirements, and without the need — resented by some — for students to take time off to study.
Electronic approach
E-learning can cost as little as a few pounds per student (declining as student numbers rise). The basic wholesale exams cost each student around £350 to £600, depending on the study method, to prepare for and sit the exam, with a short period out of the office. That is assuming a first-time pass — not to be taken for granted, given the number of students sitting the exam for whom English is not their first language. To re-sit an exam costs from about £85. But the hurdles reflect the objective nature of the standards set.
The Financial Services Skills Council intends to provide accreditation for e-learning early this year. Sara Powell, head of accreditation and business development at the FSSC, said: "As the regulator looks to implement a shift away from detailed rules and guidance towards a more principles-based approach, we anticipate increased demand for FSSC accreditation — whether this is of training providers, individual trainers, or learning solutions such as e-learning packages — as a means of ensuring that staff are competent."
So far, not all firms have paid a great deal of attention to the FSSC's various financial services accreditation initiatives, which does not detract from their potential value as a benchmark in the "as yet unknown" post-CP05/10 environment. Compliance officers suggest that this neglect may be frustrating for the FSA, which has tried to draw attention to the council's initiatives during some of its own, far more widely heeded, promotional initiatives.
The FSSC does not pretend that accreditation is equivalent to an exam result. It is instead a validation of content and presentation. But if customised e-learning, or other courses helped by FSSC or other accreditation, should in the FSA's eyes provide evidence of competence, this may move towards being a substitute for exams — even if lacking in the same standards of objectivity and benchmarking. A lot may depend on how firms use accredited courses and the proof that they provide. This is an unknown quantity, particularly among the less well-resourced smaller players. The flexibility can be misused but it can also be used beneficially.
Limited flexibility
A limitation on flexibility is the price paid for benchmarking through exams, according to Ruth Martin, managing director at the Securities and Investment Institute. "The main reason I believe exams will endure is that it is of great value to be objectively assessed securely outside of the firm. E-learning cannot get to this stage psychometrically or statistically but, on specific products or areas, it can be a measure of competence."
The "learn and churn" approach for the basic courses is legendary but it does ensure basic knowledge. Martin said the basic examinations were useful at the outset of one's career, even if not job-specific in every area. "Tailoring into the job can begin later, and e-learning is one of the tools available. Many firms choose to put candidates into higher level exams too."
Most firms do their money laundering training through e-learning, said Mark Martin, head of training at Complinet. "One of the big benefits is that it's easy to provide the regulator with an audit trail of learning progress, including when students did the course, what score they got and how many attempts it took them to pass. The interactivity that is integral to an e-learning course helps to engage your attention — and can be far more fun than listening to a trainer."
Changes to CP5/10: Free-to-attend afternoon business briefing with Complinet and Bingham McCutchen. Join us at our free business briefing on 24 January 2006, to get a clearer idea of the consequences for your firm and what the compliance function must do to prepare for the anticipated changes.
The views and the opinions expressed in 'hot topics' are that of the individual authors and not necessarily those of the Securities & Investment Institute.
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