RegulationApr 8 2016

Manager moves and FCA crackdowns: the week in news

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Manager moves and FCA crackdowns: the week in news

Protection insurance problems, regulatory crackdowns and fund manager moves dominated the news agenda for the adviser industry this week.

So those, and a couple more key themes, make up our traditional Friday afternoon round-up of what you may have missed:

1. Protection industry warnings.

Rarely does protection insurance make it this far up the agenda, but when it does, it’s usually down to the providers doing something wrong.

In this case Financial Adviser’s lead story centered on Assurant Solutions UK admitting “fundamental errors” in dealing with a legitimate claim against an income protection policy.

After telling the claimant for six months she was entitled to nothing, a pay-out was finally made once adviser Bob Cook, founder of Best Income Protection, pursued the company.

Resurrecting the spectre of past criticisms of the protection market that advisers have spent years trying to erase, policyholder Shas Iqbal said the stress and sleepless nights she has suffered have “totally destroyed” her faith in the industry.

This follows-on from protection guru Alan Lakey’s warning that such bad press was often down to poorly-designed products, repeating calls for market action to prevent clients discovering too late they are not covered.

Meanwhile, Legal & General’s head of specialist protection Richard Kateley reminded advisers that while they may be doing good work selling policies to clients and corporates, many have failed to take out business protection themselves.

2. Manager moves.

Yesterday saw a couple of big moves in the fund management industry, with Miton’s star duo exiting and Argonaut’s founders taking charge.

Miton’s share price plunged by 25 per cent on the news that George Godber and Georgina Hamilton - who co-manage the £869m CF Miton UK Value Opportunities fund - will serve their notice periods, but are set to leave the firm.

Later in the morning it emerged that the duo had been poached by Polar Capital to run a UK equity product.

Meanwhile, Argonaut Capital’s founder Barry Norris assumed full ownership of the firm, after it over the passive minority stake owned by Standard Life Investments, following the latter’s acquisition of Ignis in 2014.

Argonaut was formed as a joint venture between its founders and Britannic Asset Management in 2005. Former Britannic sales and marketing director Jonathan Polin was unveiled as Argonaut’s new chairman, in a move which the firm stressed would not impinge on his existing role as chief executive of Sanlam.

The final piece of the puzzle was Liontrust buying Argonaut’s £169m European Income and £131m Enhanced Income funds, in a move which will also see manager Oliver Russ join the firm.

3. Closet tracker crackdown.

While deals were being done in The City, over in Canary Wharf the Financial Conduct Authority was cracking its whip on the industry’s insistence on charging active management fees for essentially passive funds.

A thematic review, encompassing 23 sample funds from 19 firms, found seven key investor information documents lacked clear descriptions of how funds were managed, five of which “used a benchmark-related approach that should have been disclosed”.

The regulator has therefore demanded fund groups do more to clarify how products are managed in relation to their underlying indices.

Investment analysts were quick to welcome the exposure of so-called ‘closet trackers’, with many suggesting that the industry is “riddled” with such “zombie funds” that are not actively promoted, but still there collecting money from unsuspecting investors.

In a fairly blatant move to curry favour with said investors, Woodford Investment Management announced on Monday that research costs will be met by the firm, rather than being deducted from its flagship Equity Income fund as part of the transaction costs.

4. Happy new year.

Of course, this week also marked the 6 April start of the new tax year, bringing the implementation of several new government monetary initiatives.

It also brought with it the long-awaited turn off of trail commission for advisers - or the ‘sunset clause’ - something which apparently some smaller IFAs may still be unprepared for.

“We are mildly concerned advisers who have not engaged in the process will be waking up and wondering where their remuneration is,” Lang Cat principal Mark Polson quipped.

The similarly-trailed new state pension also came into force this week, with pensions minister Ros Altmann still having to fend off criticism of government meddling, while her predecessor weighted-in on the work and pensions committee’s suggestion that some women born during the 1950s - facing sharply increased state pension ages - could be given early access.

5. And finally...

Never underestimate the power of technical pension problems to excite the readership, as one of the most popular stories over the last five days involved misleading transfer value analysis reports on critical yields, which one firm claimed are distorting defined benefit transfer advice.

Tideway partner James Baxter said he regularly takes on clients who have already tried to get advice and received a computer generated TVAS report, which has left them struggling to understand the significance of the various quoted yields, graphs and pages of data.

Haven’t we all faced similar struggles?