This week the regulator was criticised by the industry on two counts: for failing to publish the details of its third Sipp thematic review and also for refusing to publish at-retirement guidance to remove a pro-annuities approach.
Barnett Waddingham, Talbot and Muir and Suffolk Life all criticised the regulator for only publishing a two and a half page ‘annex’ in its ‘dear CEO’ letter telling firms to pull their finger out.
Andy Leggett, who manages the Sipp business development team at Barnett Waddingham, told FTAdviser that if the industry is to properly learn lessons from the review, the regulator needs to be more transparent with its evidence.
He has a point.
The FCA’s thematic review on mobile banking findings, 14 pages; enhanced transfer value pension transfers, 27 pages; insurer’s management of claims for household and retail travel, 34 pages; and the FCA’s second RDR review, 14 pages.
Whereas the FCA’s review into providers of the £150bn Sipp market is two and a half pages. The FCA was highly critical of the market, but how can providers learn when so much is missing, such as examples of good and bad practice, percentages of failings and desired outcomes.
Come on FCA, if you want a better market, you need to publish far more details than that. The Sipp industry is ready to learn, but it needs to be guided.
Redress for non-dealing?
The story that garnered the most attention this week was a blog on non-dealing clauses.
A recent conversation with a financial adviser on his own experience of a non-dealing clause, which left most clients ignored for a full year, proved to me that these clauses, which treat clients as commodities, have no place in the world of advice.
The adviser said to me: “The bottom line is that someone has potentially been paying for something that they are not getting at the end of the day.”
This is where I question the value of such clauses. It seems they are doing the opposite of the regulator’s ‘put the consumer at the heart of your proposition’ stance.
You would think the adviser firm would want to build and maintain a relationship with the client in order to retain them following the 12-month ‘break’, but it seems they do not. While the adviser is by no means stating that all his clients did not receive a service, he believes a proportion did not.
However, according to the adviser, clients were still paying an annual adviser fee, despite not receiving a service. This raises questions as to whether the clients would be able to pursue the firm for a refund if they can prove there has been no adviser contact. Why should you pay for a service which you are not receiving?
Of course, this is only one adviser’s experience and it may be that not all clients have had the same appalling treatment. I would be interested to hear from other advisers’ experience.
Why isn’t the FCA listening?
Another popular story on FTAdviser this week was around yet more calls for the regulator to change its stance on at-retirement advice. As it currently stands the approach is pro-annuities, and, considering the Budget reforms, providers have been calling for further guidance.
Speaking to FTAdviser, Fiona Tait, business development manager at Scottish Life, said the regulator’s rules are close to 20 years old and biased in favour of clients guaranteeing income through annuities, but that this needed to change to reflect the wider array of options and the more phased approach to retirement that is coming to the fore.
She is not the first to have this view.
Phil Mowbray, the head of retail services at Moody’s Analytics, previously told FTAdviser there was a need for the FCA to produce specific guidance on suitability and risk in the retirement ‘decumulation’ market in light of the radical changes announced at the Budget.
Mr Mowbray also said there was a case for the regulator splitting its retail investment advice category to create a specific regime for at-retirement advice.
The comments left by FTAdviser readers also seemed to agree with Ms Tait’s view.
One reader said: “The new rules call into question the merits of a TVAS [Transfer Value Analysis System], which assumes annuity purchase at ‘retirement’. This is now not appropriate, as most people will not be buying an annuity. A model that incorporates a comparison with drawdown is much more appropriate.”
Another reader, Stuart Fowler, added that the industry may not need to depend on these issues being addressed by the FCA.
He said: “They should surface when the guidance providers start to work out what the basis of their guidance should be and how to communicate it to the public.
“That should bring in the modellers at the life companies and consulting actuaries who are the only people (with a few exceptions in the advisory and wealth management community) who already have the necessary framework for comparative analysis.”
It’s an excellent point, but once again raises questions as to providers’ short-time line to get a lot of work done.
