In a week that was dominated by continuing fall out from the pension reform proposals and retirement guidance deliberations, we also learned of a fresh advice firm fraud probe, momentum building behind automatic enrolment-style protection reforms and a post-RDR increase in advice fees.
In the first of our new-look Week in Brief series, we’ve collected together the 10 developments over the past five days that advisers need to know.
1. You might yet be able to offer legacy annuity clients a way out.
Since pensions minister Steve Webb crow-barred open Pandora’s Box last week by hinting that he is minded to offer the chance to ‘unwind’ legacy annuities for those that bought prior to the new pension freedoms, a growing clamour for such a change has gathered.
This week Ros Altmann added her not inconsiderable figurative weight to the idea, telling Mr Webb in the House of Commons that this ought to be considered at least for those who have previously been sold an inappropriate conventional rollover policy.
On the back of figures also published this week showing a surge in complaints over annuities since the Budget, it is clear it will be hard to put the genie back in the bottle on this one.
2. Open pensions access could have its drawbacks for some.
While many marvel at the opportunity the reforms coming in from April will give clients to access as much of their pension as they want, a legal expert has said the fact that individuals can ask for their entire pension could mean the pot is exposed in bankruptcy proceedings.
A landmark ruling last year that was not overturned allowed a bankruptcy trustee to submit an income payment order for any amount of pension an individual is entitled to access, which would have been the 25 per cent tax-free lump sum previously, but from April will be the whole lot.
3. Tide is turning against the Money Advice Service.
At the beginning of the week it was revealed that the face-to-face channel of the retirement guidance service has been handed to the Citizens Advice Bureau, in what everyone immediately saw as a huge snub for the flagship financial information quango, the Money Advice Service.
It burdens the industry with huge levy bills - Mas has a budget of £81m for this year - and has been dogged with criticism over its efficacy, so few will mourn its loss if this proves, as some suggest, to be the beginning of the end.
4. Advice gap spectre returns for FCA.
While we’re on guidance, one of the key concerns emerging is the fate of those who choose not to take guidance - should it be compulsory? - or who choose to base their entire decision on it when they could benefit from more directive advice, but are put off by fees.
Steve Webb said this week he’d like to see a “cheap and cheerful” service for such people and admonished the FCA for presiding over changes that have failed to instigate such. For it’s part, the FCA remained bullish that this would come, saying simply: “Watch this space”.
5. Fees are on the up - but why?
The concept of adviser fees was centre stage elsewhere this week after FTAdviser revealed latest MyTouchstone data showing an increase in hourly rates and percentage fees of around 5 per cent.
The data provider said it was a positive outcome of RDR that people are prepared to pay more for advice, but it is obviously also likely to be a reflection of rising regulatory costs.
6. Lloyds mainstream advice called into question.
In the context of debates over mainstream advice, the news that a former adviser - with the help of his MP, home secretary Theresa May - has secured a second meeting with the FCA to discuss Lloyd’s past advice segmentation model, is apposite.
The concerns centre around the fact that the bank’s whole of market status, which yielded better value products for many, was determined purely by a person’s wealth. Some advisers, though, have said this is a business decision and that there is no reason to cry foul.
7. Ex-Sense AR probed over investment scheme.
Speaking of potential foul play, a former authorised representative of Sense Network was revealed to be under investigation by Police Scotland this week over allegations it ran a fraudulent investment scheme. Midas Financial Solutions ceased to be an AR of the network after seven years this summer.
8. Protection compulsion attracts support.
In addition to the advice gap, and perhaps even a looming ‘guidance gap’, the UK continues to struggle with a protection gap, which many feel will have pernicious consequences in the wake of widespread welfare cuts.
As such the Association of British Insurers has released a report proposing options to introduce an automatic enrolment-style push to protection, building on a similar call earlier this year by Canada Life. Clearly there is a growing view that this idea has some merit.
9. Defections beget defections.
Manager defections have been the investment theme of the past year or more, and this week some ramifications become apparent, as it was revealed that the Ignis Absolute Return Government Bond fund has suffered major outflows in the wake of a number of departure announcements.
Like the Tories worrying over potential defections, there is a real chance that the success of those who have changed sides will prompt others to do the same, which must be worrying some fund group executives.
10. Advisers still seeking consumer credit guidance.
And finally, this week a story which generated a lot of attention focused on the complaints of a number of brokers that the FCA is being less than forthcoming over whether or not they need a consumer credit licence.
Same old, same old then: we’ve been reporting on the confusion of advisers in this area and the FCA’s refusal to offer clarity for more than a year.