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Tick tock, tick tock. Time is running out if you want to have some input into the Financial Services Authority’s (FSA) latest consultation paper on the Retail Distribution Review (RDR).

The deadline for responses to the paper unveiled last month, is today, which is probably why industry members were a bit more vocal on the issue this week.

One such voice to add more argument to the debate, was that of the CEO of Axa Winterthur Wealth Management, who said firms are just navel-gazing, rather than getting on with laying the ground work to ensure they are RDR-ready. Read More »

I’m sure you have heard the story about the lost traveller who, when he asked a local for directions to a nearby town was given a very helpful response along the lines of “if I were going there I wouldn’t start from here!”

Although apocryphal the response of this local has some resonance in the protection industry when it comes to the debate on the need or otherwise for innovation. Merely saying that something is wrong doesn’t make it right. Action is required.

I am not for one moment suggesting that the protection market has not evolved in recent years; there have been industry wide developments in pricing, underwriting process and fair treatment of customers. Read More »

QUESTION: I run a small IFA firm that works largely on a commission basis. After the newest RDR paper came out, I floated the idea of fee-based advice to a few of our long-term clients, and the reaction was strongly negative. How can I prevent clients accustomed to getting free advice from balking at the idea of paying an up-front fee?

ANSWER: The fact that your clients think they have been receiving free advice suggests that not only do they not fully understand the charging structures of any products you may have sold them in the past, but more importantly they do not appear to place any value on the advice and support that you give them. Read More »

Are high street bankers above the law?

I ask because no matter what the public throw at them, no matter how much their greed and cunning are exposed, no matter how incompetent they prove themselves to be or even how much they are shown to be bullies and thugs in pin-striped suits, they still go on pretending to be mis-understood.

Here are the people who stood on the burning deck sipping their Pimms and wallowing quite in the mess they have made of the economy, and instead of apologising to the country and volunteering to do community service – since effectively their gross mismanagement of the banking sector is (or should be) a commercial crime – they are paying themselves even bigger bonuses. Read More »

Whilst the mortgage market shrinks, the rental market booms. With the cost of renting falling and many people still not buying property, more and more people are choosing to rent rather than to buy.

This situation presents a number of opportunities for those involved in recommending and selling protection products.

One big opportunity is sitting with those of you who are mortgage advisers with a link to estate agents through professional connection or ownership, and specifically estate agents that include lettings amongst their services. Read More »

If summer 2008 was all about reluctantly saying the word recession then summer 2009 is all about trying to call the shape of a recovery.

At the moment, I am inundated with commentary from fund managers about V-shaped, W-shaped and bath-shaped recoveries.

There are clear signs the recession in Europe is over and that the recovery will be V-shaped, according to Barry Norris, managing partner of Argonaut Capital. Read More »

The question on my lips right now, is whether or not the recession is truly over.

Being the first recession I’ve lived through, well I should say worked through, I haven’t much personal experience to draw upon.

But if I rely on my “feelings” or gut instincts then I’d say it’s got a way to go yet, particularly given that unemployment is still rising. Read More »

I have to tell you, Young Adviser the blog written by your trade publication, Investment Adviser has turned political activist for you.

Concerned that the factual errors, information omittances and sometimes downright bizarre data spotted in the humble fund factsheet could indicate wider problems, Investment Adviser has launched an investigation.

It polled more than 250 professional advisers on their experiences of factsheets and put together an expert panel to analyse the factsheets of one ‘staple’ IMA sector, UK Equity Income. Read More »

Many will recall the ravages of high inflation during the ‘70s and ‘80s and the effect it had on prices and incomes.

Even though we have enjoyed relatively low inflation over the past 10 years or so, high inflation is by no means something that can be consigned to the history books.

Whilst we are currently in the depths of recession, once any recovery starts to pick up, low interest rates and a government that is pouring new borrowing into the economy could well cause inflation once more to raise its ugly head. Read More »

Every now and again, something noxious pollutes the financial services ecosystem and the shame of it is that it can cast the entire financial services community under a shadow in the eyes of the British public.

More often than not, this happens when consumer demand, and often desperation, meets the grasping greed of financial institutions

The most recent example, of course, was the spectacular collapse of sub prime credit the world over. Read More »

The ripples of the RDR are likely to be felt for some time. But what appears to be a consistent message is that the number of IFA firms will change.

The latest organisation to suggest this is IFA Promotion/Unbiased.

Already, it has seen the number of IFA branch addresses decrease by 7 per cent and the number of registered individuals drop by 9 per cent in the last 12 months.

Read More »

QUESTION: I have been an adviser for 20 years, and had planned to retire in six years time. Now the FSA is saying I need to increase my qualifications by 2012 if I’m to continue advising – would it be easier to retire early than upgrade my qualifications for two more years’ advising?

ANSWER: I don’t know how old you are but presuming you wish to retire at 65 and are therefore 59 now I would make the following comments.

Easy? Life isn’t easy. Well it may not be easy but it shouldn’t be insurmountable.

You sound as if you have a bit of a defeatist attitude. Just look at the upside.

If there are lots like you who are unwilling or incapable of making the grade look how much work will be left for those of us you are prepared t make the effort.

That should be a great incentive. Rarity brings it’s rewards in higher fees.

1. In general most people really don’t have enough provision to stop work entirely. (That includes people with £1m funds, as everyone lives up to their income), so stopping entirely at age 65 shouldn’t necessarily be a given.

2. If you have been advising for 20 years why do you think exams would pose such a problem? Indeed there may be other routes other than exams.

However, to be perfectly candid, I’m probably older that you. I have been in financial services just a little longer (since 1985).

It has always been obvious (since Gower) that qualifications were going to have to be attained.

OK – so no use crying over spilt milk, but with your experience you should be able to attain level 4, if you can’t you may as well retire.

So I would say try to attain the level first before just ‘throwing in the towel’.

- Harry Katz, principal at Norwest Consultants

Stargazers across Asia turned their eyes skyward today for the longest solar eclipse of the century. Last week, mortgage advisers were turning their eyes to their computer screens and rejoicing about another fantastic event in the east.

Good news of the week was Bank of China doing mortgage deals with four packagers. Solent Mortgage Services, Complete Mortgage & Loan Services, Connect Mortgage Group and Savills Lending Solutions signed deals with Bank of China (UK) to offer products though intermediaries. Read More »

How many of those retiring last year chose a lifetime annuity to provide their income in retirement?

Superficially the answer is ‘almost all of them’ – around nine in 10 of those accessing the retirement income market ended up with one.

But ask the question again stressing the word ‘chose’.

To say nine in 10 chose a lifetime annuity relies on the assumption that they knew they had an alternative and had weighed up the pros and cons before making their decision.

So let’s turn the question around. How many retirees last year felt they had no choice but to buy a lifetime annuity?

The cynic in me thinks the answer is still probably not far off nine in 10.

Choice is one of the most powerful forces at work in our modern consumer society, encouraging competition between providers of goods and services that ultimately results in higher standards of living for us all.

Shouldn’t this apply to our selection of a retirement income plan as much as to other parts of our lives?

In recent days Aviva has announced it is exploring the possibility of offering competitors’ retirement income solutions alongside its own. Legal & General has also said it will start selling its own enhanced annuities direct to consumers.

These moves shouldn’t be dismissed lightly as they are delivering an improvement of choice which is a good thing and they do point to a realisation that the days of funnelling clients from pension saving straight into conventional lifetime annuities are coming to an end.

But they are also just scratching the surface of what could be achieved if they had the ambition to ensure every pension client chose the best retirement income vehicle at the optimum time.

Naturally IFAs are worried that the big players are trying to muscle in on their area of expertise.

As an expansion of competition, maybe that is not such a bad thing provided the retirees are told loud and clear that they are not ‘captive’ to the insurer and that these services are not whole of market propositions.

What is clear is that IFAs must not sit back and rely on covering the basics – conventional lifetime annuity and enhanced products.

To compete in the new landscape they need to be looking across all the retirement options – from the many different types of annuities now available to drawdown to equity release – to find the right blend of retirement income products that best meet their clients’ needs.

Meeting the needs of the 21st Century retiree continues to favour segmentation and specialist offerings.

Only IFAs have access to all the products on the market and the ability to offer a truly personal service. Whatever is happening in the rest of the market, these are your strengths and you need to play to them.

- Dave Harris is managing director of sales and marketing at Living Time

QUESTION: I’m worried about rising claims in the financial advice sector, and a knock-on effect on PI premiums. Do I need to worry, and how should I prepare for rising premiums?

ANSWER ONE: PI premiums are a business overhead and as a small business it is never easy to predict future rises in overheads.

Of course claims are an important factor when insurers are calculating premiums.

Unfortunately we cannot know what we are doing today that will be the basis for future claims. The best way to reduce potential claims is to make sure our compliance is good and our clients are aware of the potential risks involved when buying any financial product.

- Diane Saunders is principal of Leeds-nased IFA Diane Saunders

ANSWER TWO: A trend of rising claims may well have a knock on effect on PI costs. In any sales process the biggest exposure to a potential claim will be the investment risk.

At Perspective, we have minimized our exposure to this risk by putting in place a core investment process that is directly aligned to the clients’ tolerance of risk, and that actively rebases regularly to match this.

The knock on effect of this is that the adviser can concentrate on the traditional role of addressing the clients’ lifetime needs and aspirations without having to act as a quasi fund manager. Integral to the process is the use of a open architecture platform with a transparent charging structure.

This means that any client will receive clear advice on their entire portfolio rather than on a transactional basis, as a result claims should be minimized as the adviser/client relationship becomes holistic.”

- Simon Gallimore is group practice development manager at Perspective Financial Group

News that the Conservative Party plans to dismantle the FSA if elected at the next general election – which must be held within 12 months – has caused a stir in the financial services industry.

The regulator has been lambasted over the past couple of years over ‘soft touch’ regulation of banks and mortgage lending, and has also come under fire for other shortcomings.

But how would the Tories’ proposed replacement, the Consumer Protection Agency, work with advisers? Despite many criticisms, the FSA has helped to drive up regulatory standards across the industry.

Read More »

Opinions about the state of the market have seldom been more divergent and the summer doldrums of 2009 seem like an ideal time to step back from the fray and ask if received opinion really has investment wisdom on its side.

It is time to ask if commonly held beliefs are actually correct when put under the microscope. Because, at present, the accepted prognosis of the market’s health doesn’t appear to stack up.

Even though there has been a significant equity rally since March, many commentators still say investing is the wrong option at the moment. The words ‘fool’s rally’ still play on many lips and warnings of further losses abound. Read More »

More people need care because they are living longer and advances in medical science mean that people with a disability or an illness that was considered a death sentence 20 years ago now live.

Life expectancy in 1948 was 66 while today it is 78, according to the government’s long awaited report into funding adult social care in England, entitled Shaping the Future of Care Together.

The impact of increased longevity not only has an effect on the elderly, but the taxpayer who has to foot the bill through higher direct taxes and council tax now or in the future.

Read More »

Anyone who fancied a break from the roller coaster ride of financial services last night failed to get one from the BBC. Last night on BBC Two at 9 o’clock a star studded cast appeared in a drama about the global financial crisis.

The programme starred Joseph Mawle as Jim, who after a chance encounter with his old school friend and mortgage salesman Dave, played by Mamma Mia star Dominic Cooper, is prepared to risk everything for the prospect of a better life by owning his own home.

I had to record this drama as I was out with an investment company last night, but I am sure I can guess how it played out. The mortgage adviser was dodgy and his friend was too trusting. Am I right?

Was it an enlightening piece of drama that conveyed your industry or did it paint you all as the villains? I would love to know your thoughts.

The 1980s mantra of “Greed is good” could have been replaced by “Credit is great” for the naughties. It is all too easy to paint those who work in financial services as being the ones who force fed this belief to a famished public.

What about those who allowed them to serve it up on a plate? It was in the government’s interest for everyone to believe boom and bust was in the past. Why plan for a rainy day when there is only sunshine ahead?

It is a relatively effortless exercise taking pot shots at the FSA.

Moreover, as the process is wonderfully cathartic, it can easily transform into the drug of choice providing a euphoria that, no matter how temporary, helps drag befuddled minds through the remnants of their working day.

Of course, the FSA frequently sets itself up for abuse and embarrassments, and in most instances those hecklers are performing a worthwhile function by pointing out (and it matters not how cruelly barbed these jibes are) the various legal, ethical and logical vacuums in regulatory thinking.

Read More »

As some of you will know, I’ve been an avid follower of what has been happening to the Lehman Brother investors who have been left high and dry since the investment bank collapsed.

After its troubles at the end of last year, little has been said as to what is going to happen to investors’ capital. Will they get it back? Won’t they? And if they do, will it take years?

As one investor put to me last week, he is very concerned that Lehmans is turning into another Equitable Life. And we all know what that means – a lot of waiting. Read More »

A new mentor matchmaking scheme from social networking website IFA Life aims to help the next generation of advisers learn from more experienced peers online.

The new service could be a cut-price way for IFAs who have been in the industry for many years to pass on their knowledge to younger advisers.

Instead of advisers taking on the expense of training and employing someone with less experience, mentoring can be done online at the adviser’s leisure.

Read More »

I am being presumptuous here but I can imagine that there will be a soon to be triple platinum Michael Jackson memorial service album coming to a store near you in the not too distant future.

I can also imagine that the sales of those artists who performed will only be heading north instead of south following Tuesday’s service.

There’s a link here, a positive performance, promoted widely will lead to an increased value being placed on your product leading to more people searching it out and purchasing it.

Our product, independent financial advice, is market leading, is continually increasing in quality and more essential now than ever. Read More »

Sifting through yesterday’s 176-page White paper, the Treasury’s latest attempt to pinpoint the causes of the credit crunch, it is difficult to discover anything new. Much of the missive is regurgitated from previous consultations, with heavy emphasis on Lord Turner’s March 2009 report.

However, the Treasury does have one clever trick up its sleeve. The paper announces plans to create a new Council for Financial Stability (CFS) this autumn, consisting of the Treasury, Bank of England and the FSA.

This financial triumvirate sounds remarkably similar to the existing Tripartite Authority. Indeed the Tripartite Memorandum of Understanding between the Treasury, the Bank of England and the FSA “sets out the role of each authority, and explains how they work together towards the common objective of financial stability in the UK”.

According to a Treasury spokesman, however, the difference is clear. Unlike the Tripartite authority the new Council will exist in law, making it accountable to Parliament and the Treasury Select Committee.

He explained: “We will be replacing the existing structure of the Tripartite where we meet strictly on an ad-hoc basis and never publish any minutes of our meetings and never report to Parliament about what we’re doing working as a group.

“Currently the criticism of the Tripartite is that they’re shadowy—people don’t know what they’re doing. Now they will be formalised, and just like the Monetary Policy Committee they will have formal minutes.”

Well, this is one of many criticisms of a system that has fallen victim to a severe media thrashing over the past year. If you type the words ‘Tripartite authority’ into Google you are inundated with headlines blaming the three-pronged system for the credit crunch.

I suspect this new council is Alistair Darling’s attempt at a rebrand. After all, some of the world’s most powerful organisations have only found success after a name change: Google began life as Backrub, while Pepsi’s original moniker was Brad’s Drink. Before Nintendo became famous it was called the MaraFuku Company (imagine the fun kids would have had with that).

So perhaps the Treasury is following the lead of successful examples and updating its image, but I’m still not convinced that the proposed ‘Council for Financial Stability’ is a sufficiently inspiring title. Maybe the Treasury should follow the lead of Ukrainian village Oktyabrskoye. The Telegraph reports that villagers want to rename the town after their hero: Michael Jackson.

It may not be state owned, but Nationwide is refusing to throw its struggling borrowers on the scrap heap by offering existing customers who are in negative equity additional borrowing of up to 125 per cent loan-to-value.

A lot of early Treasury select committees questioned why lenders had allowed homeowners to overstretch themselves with 125 per cent LTV deals. A lot of recent ones have seen lenders asked why they are insisting on such massive deposits before they offer a home loan.

You can’t help but have sympathy for lenders – condemned if you throw cash at borrowers, slammed if you don’t.

Read More »