This week we have been mostly talking about annuities.
Ahead of the publication today (14 February) of the Financial Conduct Authority’s long-awaited thematic review into the annuity market, our inboxes were awash earlier this week with expert commentary on how to rectify obvious consumer detriment.
Most notably, Gina Miller, co-founder along with her husband Alan of SCM Private of the True and Fair Campaign, drew the ire of readers with her suggestion that consumers need to take advice and that the Money Advice Service should employ its own IFAs and provide services for free to small-pot clients.
It is a laudable principal, taking one step further the Labour Party suggestion of referrals to whole-of-market non-advised brokers at a minimum, but I sympathise with the adviser view that they should not be picking up the bill. This would effectively mean advisers funding a service that is in some way, shape or form a competitor.
If that’s not going to work, what else could be done?
Well, elsewhere national advice firm LEBC argued for the banning of ‘limited’ restricted advice panels for annuities and commission on non-advised sales in line with the Retail Distribution Review requirements for other product areas.
All very reasonable in theory, but these measures still fail to provide a comprehensive solution for clients with small pots - and in any case are too radical to be implemented any time soon.
This latter supposition was confirmed when the paper was finally published and revealed the FCA’s conclusion off the back of it’s year-long investigation is... that it must undertake another year-long investigation.
For the record, the review put some flesh on the bones of the torpor in the market we already knew existed: 40-60 per cent of clients do not shop around; 80 per cent of sales to those that do not shop around leave the retiree worse off. Some 134,000 people a year at least are losing out.
In our follow-up blog we proposed some measures that the FCA could take right now.
First, enshrine in the FCA code of conduct a stricter version of the ABI code requiring firms to explain in plain English the finality of an annuity purchase and that they could be losing out.
Second - and hat tip to Steve Lowe of Just Retirement - use existing TCF rules to force firms to undertake basic underwriting and prevent them providing default annuities to clients that qualify for health or lifestyle enhancements.
RDR in numbers - again
In what was otherwise a relatively quiet news week, the RDR reared its head again in terms of numbers of firms lost from the market when Matrix data revealed that 145 firms have been lost in the year since implementation.
If this doesn’t sound too bad the research firm maintains - in line with other anecdotal evidence - it is because things are not as bad as feared and that the market has “slowly started to turn around”.
Many of the firms lost could be also the result of mergers rather than closures; this week there seemed to be further evidence of sector consolidation when we reported that Hampshire-based Prosperity IFA is in advanced talks with 10 firms, in addition to the 15 it has already bought.
And while we’re on the subject of sector machinations, a popular story among advisers this week was the news that an ex-SJP adviser Tim Horrocks has set up new IFA firm RockWealth to provide discretionary management and advisory services.
Good luck Tim.
Hospitality hubris
Another story that has been gathering momentum over recent weeks is in relation to provider-adviser inducements, and more specifically whether providers can continue to offer the events they traditionally have the their intermediary contacts under the FCA’s new rules.
This week Aviva decided it could not as it confirmed it was ceasing all of its hospitality events for our life distributors. Others, including Friends Life and Aegon, said they were reviewing their policies when questioned.
Some firms seemed to think this is going too far: Standard Life and Legal & General told our sister title Financial Adviser they are standing by their hospitality arrangements with advisers, as spokesmen insisted their practices were in keeping with the FCA’s guidelines on inducements.
What do you think: should providers be offering any hospitality or events? Is there a risk of detriment to the sector if the tab of contact with providers is turned off?
