While half the industry seems to be off on their holidays, the rest are keeping busy with shock mergers, insistent client wrangles and multi-asset meddling.
There is always enough news in this market to keep us busy, so here is our weekly round-up of what you need to know:
1. Ombudsman will back advisers.
Yesterday, FTAdviser revealed the Financial Ombudsman Service will back advisers on ‘insistent clients’, as long as they follow the Financial Conduct Authority’s unofficial guidelines to document the client declined to follow the advice given.
FTAdviser trawled through Fos’ database of online decisions and found an example of it throwing out part of a complaint because the adviser had documented he had an insistent client.
The decision, published prior to the pension freedoms in February this year, concerned the advice that a complainant, known as Mr G, received from Lighthouse Advisory Services to transfer his personal pension benefits into new arrangements.
According to the decision, the adviser recommended against the transfer, noting: “I understand you are insistent that you wish to transfer from the scheme.”
The decision said that as the client had disregarded the advice, the Fos cannot investigate it.
FTAdviser also found a number of decisions which involved insistent clients, where the ombudsman told advisers that ‘warning’ clients who wanted to perservere down a different route than was advised was not good enough and in all these cases they should have documented the client was insistent.
The Fos upheld a client’s complaint against an advisory firm which advised her to switch a savings into a self-invested personal pension, which the adviser insists excluded the underlying Sipp investment into Harlequin.
Ombudsman Roy Milne wrote in his decision that Kingswood Financial Advisers should have made it clear that the underlying investment was not suitable and that if the client chose to ignore that advice, then they should have treated her as an ‘insistent client’.
2. Rivals unite in response to annuity market meltdown.
Tuesday saw the news annuity specialist rivals Just Retirement and Partnership are to merge and create yet another financial services acronym, JRP Group.
Both companies have been rather publicly reeling since the equally shocking Budget at-retirement reforms were announced last spring, with Partnerships results - published the same day - showing sales of individually written annuities had fallen to £128m, compared with £334m in the first half of 2014.
The market statement spoke of strengthening the “competitive position” of the combined group and acceleration of “critically important” new product launches, but also mentioned pre-tax cost savings of at least £40m a year, with no specifics given as to possible job cuts.
Advisers generally welcomed the news, although some pointed out the lack of their competition may lead to a fall in annuity rates, especially in the enhanced space, which both firms helped to push forward.
3. Trans-Atlantic relations.
This week also saw a couple of stories emerge from across the pond, with our regulator giving the US some pointers from the first few years since the Retail Distribution Review, while they showed us the way on so-called ‘robo advice’.
FTAdviser sister paper Financial Adviser reported that the FCA has been in talks with its US counterpart, the Financial Industry Regulatory Authority, about its experience in implementing the RDR reforms.
Although the spokesman in Canary Wharf could not give details of the talks, she confirmed the US regulators were looking to learn about the impact of banning commission on investment advice and introducing minimum levels of adviser qualification.
While the UK is ahead on those points, we’re still dragging our collective feet in terms of automated and algorithm-based advice services, which are predicted by one US-based consultant to reach around £1,200bn in assets under advice in the next five years.
The firm explained that this was being driven by big fund managers like Charles Schwab and Vanguard releasing already-popular automated propositions into the market earlier this year.
Such a boom has caught the attention of US regulators though, with a warning published recently stating that such tools “may rely on assumptions that could be incorrect or do not apply to an individuals’ situation”.
4. Another week, another swindle.
Our trusty court reporter came back with news on Wednesday of a group of businessmen who allegedly lured pensioners into investing £558,000 in a worthless company, siphoning off the money to spend on flash cars and private mortgage payments.
Mark Chapman and his brother Lee claimed to have marketing deals with the MCC to use the name of their home ground at Lords on a range of exclusive whiskies and gins, persuading eight elderly investors to part with their cash, eventually losing them everything except £5,000 which one investor succeeded in having repaid.
5. Beware lofty multi-asset income pledges.
Finally, our other sister paper Investment Adviser warned investors that multi-asset funds promising 5 per cent income could well be taking “a gamble” with their capital.
Wherever there is demand, there will inevitably be those rush to supply, and often making lofty claims to get a piece of the pie.
In this case, with a persistently low interest rate environment, multi-asset income funds seem to offer that holy grail of consistent returns and good diversification.
Parmenion senior investment manager Meera Hearnden pointed out: “To get a 5 per cent income in the current low growth, low interest rate environment, where bond yields have compressed, would set alarm bells ringing.”
peter.walker@ft.com
