Unsurprisingly pension continues to dominate the news agenda four weeks ahead of radical reforms, with attention turning on FTAdviser this week to extensive warnings under the ‘second line of defence’.
Elsewhere, though to a very real degree this is related, concerns over adviser liabilities were stoked again following a speech by Martin Wheatley, while a brace of news stories brought attention to the fallout from two major fund failures.
1. ‘Second line of defence’ continues to worry.
Kicking off this week, Old Mutual told FTAdviser it is planning to create extensive factsheets detailing a far broader range of potential issues and questions for clients seeking to encash their pension post-April, going beyond “flawed” regulatory guidance.
The firm is not alone as FTAdviser revealed today that Zurich, Royal London and Aviva also plan to go above and beyond the FCA’s requirements, including by producing comprehensive guides for consumers.
Issues the life companies have highlighted which they say the FCA failed to mention - though to be fair the regulator said its list was “not exhaustive” - range from the fall in annual allowance to the risks of clients giving up guaranteed annuities.
Separately, savings and Isa provider Scottish Friendly has called for providers to ensure warnings are presented ‘formal’ in the same vein as those issued for Scarps a decade ago. The FCA has left the working of messages up to providers, who can use limited templating.
2. Where does the liability buck stop?
Over the last few weeks, there has been much adviser concern on their liability for advice if consumers press ahead despite warnings, which came to a head in relation to the new pension rules at FTAdviser’s recent retirement freedom forums.
This week FCA boss Martin Wheatley finally acknowledged the concerns at the National Association of Pension Funds’ investment conference.
He said that it is “perfectly reasonable” for advisers and providers to question where accountability eventually lies, ahead of pension freedoms which ostensibly transfer choice and responsibility to consumers.
During FTAdviser’s two retirement freedom events last month, advisers questioned the FCA on retrospective regulation and ombudsman claims which they feared might arise from advice given now in relation to pension freedoms.
In particular, advisers were concerned about clients seeking to withdraw cash to buy housing or transfer from safe DB pension schemes.
Maggie Craig, head of policy for savings, investments and distribution, said advisers should exercise “judgement” on a case-by-case basis when deciding whether to walk away from contentious cases or insistent clients.
In terms of how to ensure poor outcomes are kept to a minimum, Mr Wheatley flagged up the second line of defence risk warnings to be issued by providers and the Pension Wise guidance guarantee.
3. Poor fund management.
Two stories which garnered the most attention this week regarded fund failures which have cost investors millions - and could be costly for recommending advisers.
FTAdviser revealed that a bitter dispute has erupted between the administrator of a promoter of a series of funds which collapsed through 2011 and 2012, and its founder, in the wake of the publication of an initial report into the failures.
Malcolm Fillmore of BM Advisory, joint administrator of Propertybourse and liquidator of its two principal investment funds, has filed an interim report attributing the funds’ demise almost entirely to poor management. Liquidators estimate investors have lost around £20m.
Meanwhile the FCA announced this week that Capital Financial Managers and Blue Gate Capital, former authorised corporate directors of the Connaught funds, will be formally investigated for their role in the demise of the Income Series 1 Fund.
Judging from the comments on this story, it is clear this news has delighted some FTAdviser readers who believe that Capita should have been investigated long ago, for example in relation to its role as the authorised corporate director of Arch Cru.
4. Market cooling but prices surge.
News out today revealed that property prices not only hit 2008’s peak but actually exceeded it by £34,000 in February, according to LSL’s monthly house price index.
The data chimes with the latest Land Registry house price index, which showed that in January average house prices were just £2,000 less than the peak of the market.
A third set of data published by the Royal Institute of Chartered Surveyors London was the only place in the UK where more surveyors reported price declines rather than increases in February, suggesting a lack of supply was continuing to squeeze prices upwards.
Across the board surveys are reporting a drop in transactions which is attributed to supply, which Rics said would make property in London, for example, “even more unaffordable over the medium term”.
5. Clarity needed on commercial property.
And finally, FTAdviser revealed this week that the FCA is refusing to update its commercial property rules despite self-invested pension providers taking divergent approaches to commercial property holdings which could have implications on costs for consumers.
Some firms are treating all properties as standard, and others are taking the other extreme of designating everything non-standard. Non-standard assets trigger a capital adequacy surcharge and increase the cost of capital.
Dentons said in the absence of clarification from the FCA, the trade body for the sector, the Association of Member-Directed Pension Schemes might need to step in.
