RegulationJan 8 2016

Banks off hook and back to advice: week in news

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Banks off hook and back to advice: week in news

The New Year started with a bang, as journalists pounced on the regulator trying to sneak out its cancellation of a banking culture review and the fact two of the UK’s largest banks are warming to in-branch investment advice again.

Those two themes, and three others, make up the return of our week in news round-up for 2016.

1) Banker bashing over...

As everyone else was stocking up on booze and fireworks, the Financial Conduct Authority attempted to quietly drop its review of culture at UK banks just before New Year’s Eve.

The regulator’s review was previously detailed in its annual business plan last year, aimed at determining whether programmes to shift culture in retail and wholesale banks were “driving the right behaviour”, focusing particularly on pay, appraisal and promotion of middle management.

Further enquiries led to a fuller explanation of the regulator’s rationale, with the main thrust being the banks themselves must take responsibility for defining the standards they expect from staff and managers.

“Having undertaken an initial piece of scoping work we decided that a traditional thematic review would not help us achieve our desired outcomes and we would therefore take forward our work on culture through other routes,” said a spokesperson, adding the decision was internal, rather than coming from the Treasury.

Earlier today FTAdviser reported the Treasury select committee stated it will be hauling FCA chairman John Griffith-Jones, and acting chief executive Tracey McDermott in front of them for a fuller explanation.

Meanwhile, the hunt for someone to fill the unenviable top job at the FCA took another turn this week, as Ms McDermott ruled herself out of the running.

2) Banks get back into advice

Trained cynics as we are, it was hard not to connect the apparent thawing of the FCA’s hard-line stance on the banks, with revelations on Monday (4 January) that a couple of the big high street brands were warming to advice.

Santander UK gave full details of its plan to restart by March, with 200 branch-based advisers helping customers with over £50,000 to invest, alongside a new platform roll-out for the mass market.

Again, cynics were quick to point this comes only a couple of years since it was hit with one of the biggest ever retail banking fines for giving unsuitable advice to customers, having previously closed its advice division in February 2013.

Calling round the rest of the market, FTAdviser then revealed Royal Bank of Scotland was also in the process of updating its policy on advice, with plans to “augment” its offering to assist those considered less than high-net-worth.

A spokesperson for RBS said: “After Retail Distribution Review we have offered investment advice to our customers with more than £100,000 to invest, though those customers with less than £500,000 we have temporarily restricted our offering as we further develop our proposition.

“We expect these developments to be completed later this year to enable us to better serve our customers.”

3) New Year, same old ombudsman

It was a tale of two decisions this week for the Financial Ombudsman Service.

Monday (4 January) saw FTAdviser report David Jones Financial Planning was being told to compensate a client for unsuitable advice, despite the fact the discretionary managed portfolio he recommended increased by 45 per cent between March 2009 and April 2011 - for all the annoying specifics click here.

However, Tuesday (5 January) saw some form of redemption, as the Fos rightly rejected a complaint made by a claims management company for a blind Sanlam client - full details of the case can be found here.

4) Latest data reveals worrying retirement trends

The latest data drop from the FCA yesterday (7 January) revealed even eight months on from the pension freedoms, similar problems abound in the retirement income market.

Figures showed the highest levels of adviser use was for customers going into drawdown, at 58 per cent, meaning 42 per cent are entering drawdown without help from an adviser.

On average, just 17 per cent of consumers told their provider they had used the Pension Wise guidance service, a figure which increases to 22 per cent of consumers with small pots, where use of regulated advice is lower.

Meanwhile, releasing consumers from their annuity shackles has still not meant many are shopping around to find an income in retirement, with 58 per cent going into drawdown with their existing provider and 64 per cent purchasing annuities with their existing provider.

This led to a barrage of emails to FTAdviser from said providers expressing grave concerns about the potential for another mis-buying scandal.

5) Housing policy criticised

Last, but not least, was the former Conservative shadow chief secretary to the Treasury Lord Flight’s condemnation of the government for its changes to the taxation of buy-to-let investors, warning it “risks the very crisis” the Bank of England recently warned about.

He argued it is “precisely the wrong time to be attacking the buy-to-let market, when the balance of supply and demand is shifting”, adding the “attack” could “create a sharp fall in prices, if not a crash”.

It is certainly set to be an interesting year for that market, with investors rushing to get deals down before the stamp duty increase hits at the start of April. Keep on visiting FTAdviser for the latest on whether there will be a buy-to-let stampede at the start of 2016.

peter.walker@ft.com