The start of another year – 2014 is now upon us. A less dramatic start to the year than last, but one that holds challenges and opportunities nonetheless.
It may seem a bit early, given that RDR is just a year old, but the FCA will be conducting its post-implementation review this year. They will be gathering evidence through the year.
I believe it will be hard to discern any definite trend given there will only be one full year of data: whether changes are a blip or an indication of something more permanent.
Obviously, they will be able to explore clients’ experience and behaviour. As I have previously said, the full impact on the sector will take more time to be fully felt, but Apfa will be engaging with the FCA about what is working and not.
I think 2014 will be a critical year for the FCA. After it was set up in April, it has launched an array of initiatives that could make the FCA quite distinct from its predecessor. We await its conclusion to see if the regulator will change. Apfa hopes to see some positive outcomes in the amount, manner and timing of reporting requirements as the review of its data requirements conclude.
The thematic review of non-advised sales and the role of simplified advice promises to be interesting too, if the simplified model can be adapted to give firms sufficient reassurance that such a process would not be judged as falling short of full advice standards by the Ombudsman. I would also expect to see progress on measurable performance indicators, reform of the fee structure and a review of the longstop.
Finally, I hope the FCA continues to engage with the sector in the positive way it started – it is vital if a shared understanding about what it expects advisers to do is to develop. In spring, the first significant volumes of smaller companies will reach their staging date for auto-enrolment.
This will provide a test for the ability of the pensions sector (both providers and advisers) to cope with large numbers, although the 2014 peak will still be far lower than those coming further down the track. The department for work and pensions will make decisions about potential changes to how much pension schemes can charge and whether schemes that pay trail commission are eligible for auto enrolment early on in the year. This could be potentially disruptive to the process of getting the large number of firms through auto enrolment.
The long-term care bill should complete its passage in the early months. Following this, the department of health will consult on the detail of the way in which local authorities will be obliged to promote consideration of financial advice and facilitate access to it for those in need of care that have to self fund. A recent survey of advisers, conducted by NMG Consulting for Apfa, indicates that nearly 60 per cent are interested in working with local authorities to provide advice to these people. If we can get this right, it will provide a potential run of leads for advice businesses that wish to engage and an opportunity to demonstrate to government and a wider public the value of financial advice.
In May, the European elections will be held. A new European Parliament might choose to revisit its consideration of legislative proposals that have not completed the approval process. This is likely to be true of both the reconsideration of the Insurance Mediation Directive (which will have potential impact on selling protection) and the Prips regulation, which is principally focused on disclosure documentation.
Towards the end of 2013, we saw and overturned an attempt to use Prips as a vehicle to cap what advisers’ could charge for advice. A return of similar proposals would be very unwelcome. After several years of economic difficulties across Europe, the make-up of the new parliament could be radically different to now which may pose a threat.
Then there is the UK general election. Obviously, this is not due until 2015, but we will see increased political positioning from the parties and they will be preparing their policies for the election. It will be important to engage and ensure that the adviser voice is reflected in the development of proposals that would potentially affect the sector and may in due course end up as government policy.
These are just a few of the things that are on the horizon as we start the year. What is certain is that there will be other issues, as yet unforeseen, that will be beneficial or present a problem. In 2014, Apfa will continue to represent financial advisers as the profession navigates these threats and opportunities.
We will seek to grow our membership and further unite the sector to build an increasingly effective voice for financial advisers.
Chris Hannant is director general of Apfa
KEY POINTS
- The FCA will be conducting its post-implementation review this year.
- In spring, the first significant volumes of smaller companies will reach their staging date for auto-enrolment.
- The long-term care bill should complete its passage in the early months.
