Last month, Eddie George, Governor of the Bank of England, made clear his view that only a long-term programme of higher-quality training could prevent the industry having a tighter regulatory framework imposed upon it. He said there was "a social argument for protecting consumers, who necessarily rely upon purportedly expert financial advice and assistance, against being sold a pup, whether through sheer negligence or incompetence, extending through deliberate deception to fraud".
Mr George said it was important to accept that customers of financial services needed greater protection than did consumers of other products because of the confusing nature of financial products and because clients are ill-placed to compare competing products.
The Norwich Union was heavily criticised by the industry regulator, the Personal Investment Authority (PIA), and admits that its sales staff were in the past sent out without enough product knowledge. Richard Mathers, Norwich Union's training and development manager for life and pensions, says: "I used to work for the construction industry, and we would not have let our people out without knowing the product, and they were only selling concrete." He adds: "The model we had was an Eighties model, which was not good enough. The industry needed to look at itself, and sort itself out." This has been achieved, Mr Mathers believes, to the extent that it has probably become too cautious in ensuring staff are fully informed. Norwich Union has a ratio of one training officer for every 25 sales people, and the training budget for its 200 sales staff was pounds 1.2m last year.
Norwich Union is moving from directly employed sales staff to appointed representatives who are self-employed, operating on a commission-only basis. Only a person who already has a financial planning certificate (FPC) will be considered as a new representative.
The PIA instituted a new training scheme for awarding FPCs from last October, and existing advisers will have to pass at least papers one and two by July next year to be permitted to continue selling.
Prudential says this has had little effect on how it operates, with existing sales representatives achieving a very high pass rate. But the Pru's financial planning manager, Norman Turner, admits there is no room for complacency. "Every big organisation has to keep watch carefully, and occasionally you have a case goes wrong, it will happen." With 7,000 staff, the Prudential's annual training and development budget is pounds l0m.
Customer perception of industry mis-selling was a particular problem to a company like Allied Dunbar, which has long marketed itself on the back of its representatives. "Our brand is built on the quality of our advice, which means a heavy investment in training. Other companies now have the same commitment, which is good for the industry," says Andy Smart, compliance officer at Allied Dunbar.
The response of Allied Dunbar to criticisms of the sector has been to reinforce existing training programmes, so that new representatives go through a process akin to traditional apprenticeships. Most company reps are self-employed, and Allied Dunbar says it treats them as if they are franchise holders for the company.
Mr Smart adds that the ongoing support available to representatives of the major providers gives them a big advantage over independent financial advisers. He believes that the problem now lies with IFAs, especially those belonging to small organisations who are short of support and are unlikely to have a comprehensive product knowledge.
"They would say that, wouldn't they," responds Philip Telford, a senior researcher with the Consumers' Association. "Our last research showed that you were more likely to get good advice from an IFA."
The Consumers' Association has been critical of the major providers for mis-selling, and believes that the FPC is an important move. Mr Telford says that the FPC examinations are still not tough enough, with papers one and two using multiple choice questions which he says are only a little more difficult than GCSEs.
"There is no empirical evidence of an improvement," says Mr Telford. "Our line is that we want to see people professionally qualified, moving them into a true profession. Passing exams will not guarantee good advice, but it makes it more likely. We don't know yet whether it has solved the problem, but it is a good start."