SJP – above the rules?

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When the adviser charging rules were first promulgated there was a justifiable outcry about how this would benefit bancassurers and vertically integrated businesses. IFAs were rightly concerned about the potential for abuse in the way that costs of sale were calculated: much as they had been for years.

The FSA were very clear. The rules would ensure that businesses of this kind would need to fully cover distribution costs via their adviser charges and that no subsidy from manufacturers would be allowed.

And initially this scenario appeared to play out.

Retirement – Five things that were important in 2014 – and five to look out for in 2015

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As one year draws to a close and a new one begins, it’s the perfect time to reflect on the events that have shaped retirement advice in the last 12 months and cast an eye forward to what will be affecting your business in 2015.

There’s plenty to choose from so here are five key points from 2014.

  • FCA’s thematic review of annuities – this found the annuity market wasn’t working well for consumers with 80% of those who bought an annuity better off if they’d gone for an open market option. With the findings triggering a market study to ensure consumers get a better deal, we’re likely to see more transparency introduced around annuity sales.

If it looks too good to be true….

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The Bank of England base rate has been at a record low now for 6 years and during that time the rates of interest available to savers have dwindled to record lows. As a consequence, it is entirely understandable that investors are seeking a better return with a minimum of risk.

But investors seeking better returns need to exercise enormous care. In the investment jungle there are many traps and, unfortunately, unscrupulous individuals who are quite prepared to lie, cheat and dupe the unwary.

Beyond regulation

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Reading an article on entrepreneurship recently, I was struck by a phrase that described the innovation in business as “creative destruction”.  I thought this phrase carried with it both the energy and excitement of innovation, along with the inevitable discomfort of trying new things out, replacing known routines with new ones and slowly, painfully gaining momentum from the mounting small successes – or not.

The pace and weight of recent regulatory changes have meant that much of the change we have seen implemented in the past few years has been driven from this source rather than through the creative entrepreneurial process alone.  This has me thinking: what will the future hold for those financial advisory businesses that can consistently innovate beyond the requirements of regulation; that can make new need-fulfilling connections and combinations and that truly differentiate themselves?

The Emperor’s new clothes

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Although I am a staunch supporter of the Pension changes, readers of this blog will know that I have been very concerned about the “Guidance Guarantee” and the potential for this to be delivered badly and without sufficient recourse to full advice.

The Government’s announcement that TPAS and MAS will be selected to deliver guidance is possibly the worse outcome imaginable. As an organisation, MAS has been rightly criticised for its performance and is currently undergoing a review requisitioned by the Treasury Select Committee. How then is it credible that they are given more work to do?

Better workplace pensions: it’s not just caps and commission

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In the immediate aftermath of the DWP’s snappily entitled paper “Better workplace pensions: further measures for savers” the wires were abuzz with talk of charge caps and the banning of Active Member Discounts (AMD) and commission.

Quite rightly so – these changes will have a significant effect on our industry (in fact you can read our own summary of the main issues here).

Much less attention has been given to the other key aspects of the paper – Quality and Governance.

Will pension reform bring new risks for advisers?

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Although the “sex and violence” days of UCIS may well have passed, the FCA remain concerned at the potential risks arising from inexperienced investors being exposed to non-mainstream investments.

Interestingly, in their latest warning, there is also reference to advisers seeking to use execution only or insistent client arrangements to circumvent suitability requirements. That is a truly worrying trend and one which has huge consequences for the new world of flexible retirement.

Many investors simply do not understand the risks that they run. The “search for yield” has always and will always leave certain investors open to the temptation of investments that promise higher returns. It is the adviser’s role to warn against such an approach and to steer the client towards investments that they can understand and which are suitable for their risk attitude.

Thoughts on a momentous year

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Earlier this year, I wrote about how RDR was simply part of a journey not a destination in itself. 12 months ago, we were all looking towards the implementation of RDR with a degree of trepidation. Would our preparations be sufficient? Would clients be prepared to pay fees?

In truth, our worst fears were unfounded. Clients have seen the benefits of a fee based world and I genuinely feel that most IFAs are now firmly convinced of the benefits of continuing on the path to even higher levels of professionalism.

Regulatory change has continued unabated. RDR II, or the platform paper, will have profound effects on our profession and the key players within it. The principles that it promotes are laudable and should remove some of the “smoke and mirrors” within the investment industry.

Time for the Sheriff

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Earlier this year, I wrote about how non-advised sales were fast becoming the Wild West of financial services. One of the biggest growth markets is for annuity purchase and I recently saw some statistics which showed that non-advised annuity sales had increased significantly in 2013.

Let me say upfront that, although I believe that most clients will always get a better outcome from advice, I do accept that for clients with small pension pots, the cost of advice may negate any gain they might receive. But, and it’s a huge but, there needs to be much tighter control on the activities of some non-advised annuity services.

Lloyds Boiler Room

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Yesterday’s fine on Lloyds underlines what IFAs have known for years. Bank “advisers” have been the cutting edge of a gigantic boiler room scam perpetrated by the bancassurance nightmare of the last 20 years.

Reading the decision notice is truly shocking. Incentive schemes were designed to drive product sales with a passing nod to quality and no consideration of treating customers fairly. Given that, post Northern Rock, the FSA poured huge resources into “enhanced” supervision, surely we are entitled to ask why it took so long for these things to be discovered and stopped?