Your IndustryOct 31 2014

10 things you need to know from this week’s news

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Given that we operate in a sector which is being choked by the “creeping knotweed” of regulation, to borrow a term from our columnist Jeff Prestridge’s excellent diatribe on the subject this week, it is perhaps less than surprising this week was dominated by regulatory news.

But alongside a brace of big fines, a judicial review fight over FCA capital adequacy rules and ‘project innovate’ updates, this week also saw interesting developments on a range of areas from ‘unwinding’ annuities to a Schroders’ trust which has just appointed its third manager in a year.

Here’s our Week in Brief run-down of the top 10 issues you need to take away from the past five days.

1. Restricted panel deals could come back to haunt firms.

The biggest news was undoubtedly that Sesame, the largest and oldest adviser network, has been fined for the fourth time in 10 years, this time a penalty of £1.6m - reduced from £2.3m for early settlement - for demanding six-figure deals for providers to appear on panels.

Earlier in the week a probe over similar deals agreed to by Partnership was dropped, but one assumes this is not the last we’ll hear of this. My inbox contains some rather interesting tid-bits on other arrangements - and as I said earlier providers must surely be in the crosshairs as well.

As for Sesame itself, its executive chairman told FTAdviser yesterday it would be reviewing the five-year plus deals, which could mean it is going to face further costs to “tear up” contracts.

2. FCA faces capital adequacy fight...

FTAdviser exclusively revealed earlier this week that the self-invested pension trade body the Association of Member-Directed Pension Schemes is seeking to launch a judicial review into new capital adequacy rules published in August which its legal advice branded “unlawful”.

It is particularly angry that the views of the sector were ignored during a lengthy consultation, but it could have its own fight on that front after we also exclusively revealed later in the week that very few Amps members were canvassed on action and many think the rules are “acceptable”.

3. ... And Fos won’t get off easy either.

Another Sipps wrangle continues over a landmark ombudsman decision punishing provider Berkeley Burke for not doing adviser-style due diligence, which was rescinded amid talk of a judicial review being sought by the firm.

In a statement given to FTAdviser this week, Berkeley said it believes Fos does not have the legal right to undo agreed final decisions, that the offer to reconsider the decision has “no basis in law”, and that it will probably launch a judicial review anyway.

4. Lowly bank rates are hitting Sipp profits.

Finally in the world of Sipps, AJ Bell confirmed in results we reported on this week that it had shed £5m in profit “entirely” because poor bank rates had hit the amount of interest it retains from client cash accounts. Some don’t believe they should be keeping any of it anyway.

5. A fairer way to unwind annuities is raising eyebrows.

On the back of debates which raged last week over whether it would be fair of Steve Webb to force providers to unwind legacy annuities, a suggestion was made that firms could offer a ‘fair value’ to buy out want away annuitants.

The idea appeals to some, though crucially we’ve not yet heard of any annuity providers that are keen. Three we spoke to were particular against the idea because of the long-term underlying investments and a potential hit on rates.

6. FCA is all about innovation now.

Having been chastised over the advice gap the FCA is keen to show its innovation credentials, this week launching a hub that will provide “guidance” and “informal steer” to firms, while Martin Wheatley was promised to reverse a bias to bigger firms in regulatory focus.

7. Endowments are under threat from tax changes.

There are 1.1m of the policies still in force so this will be big news for many of you and it went largely unnoticed: experts have picked through the Finance Act 2013 and believe the changes will result in holders now being subject to income tax rather than just capital gains tax.

Lynda Kennedy, secretary of the Association of Policy Market Makers, said: “This made the purchase of such policies unattractive, and punishes the small investor.”

8. Schroders manages to hang on to Growth Trust.

Schroders has managed to hold onto the UK Growth Trust that was managed by Julie Dean, though following the big name departure it was forced to cut its management fee. It had done the same a year ago when it appointed her to take over after the departure of Richard Buxton.

For the sake of its margins it will be hoping new manager Philip Matthews hangs around a bit longer than this two predecessors.

9. Yorkshire gets its punishment over struggling borrowers.

The second fine of the week - well, chronologically the first - was a £4.1m penalty handed to Yorkshire Bank over its treatment of struggling borrowers, who were not turfed out of their homes but were subject to harassing calls and delays which racked up substantial and unaffordable bills.

It had actually begun to review all of its dealings in this area in February and reckons it will eventually hand out redress to the tune of £8.4m.

10. And finally...

Ending on a high note, yesterday evening the prestigious Money Management Financial Planner of the Year awards were doled out, at an awards do that is responsible for my sore head today.

The overall winner was Robin Keyte, director at Somerset-based Keyte Chartered Financial Planners, while category winners included well-known commentators Alan Lakey of Highclere Financial Services and Yellowtail’s Dennis Hall.

Well done to all.