Here are the top five themes from this week’s news:
1. Advisers on pension freedom front line.
When the freedoms were originally mooted, some advisers warned that the government were opening up a major can of worms - and how right they were.
Yesterday (1 May) FTAdviser revealed how a number of advisers have been asked to sign documents confirming that advice has been given when none has occurred, so that members can persuade providers to transfer defined benefit pots without having to pay for full advice.
I doubt any regulated adviser would oblige, but following publication a number of other issues came to light in a lively forum debate.
Advisers are concerned that clients could lie to providers by stating they have taken advice when they haven’t and, if evidence is needed, that they will produce faked letters. After all, advisers details are readily available on the financial services register.
A FTAdviser reader said his client was recently advised by his bank manager to get the start up money for a business by cashing in his pension. When the adviser told him he could not help him, he went to the provider and said he had taken advice - seemingly without even needing a letter.
Last week we reported providers do not need to know what the advice was, they just need to know that it was taken. But it may be that in time providers need to start doing more formal checks to ensure the advice was actually genuine.
Oh, and while we’re on one can of worms FTAdviser also revealed this week that advisers will not be spared the ‘second line of defence’ from providers despite the fact they can process business unencumbered on behalf of hundreds of clients.
2. Huge hike in pension FSCS levies.
We were all taken by surprise this week by the Financial Services Compensation Scheme levy, which was hiked for pension advisers by a whopping 75 per cent from the forecast in January and will now be three times last year’s bill.
FSCS boss Mark Neale could not rule out further compensation costs associated with the self-invested pension-wrapped unregulated investments at the root of the problem, which means even it could surpass the £100m cap for the sub-class and leave other sectors picking up a bill.
Something must be done - the questions is what?
Speaking to FTAdviser, Chris Hannant, director general of the Association of Professional Financial Advisers, said that the source of the problem needs to be tackled, and the FCA should be using its product intervention powers to intervene.
Advisers cited a range of options, from hiving off advisers that process unregulated investment business into a separate FSCS category to spare others, to more general issues such as strengthening PI insurance was in place and always claimed.
3. Sipp outrage.
This week several self-invested pension providers expressed surprise that Mattioli Woods had decided to charge its clients £495 plus Vat for the changes it made to its scheme rules following the pension reforms.
Mattioli Woods said the charge was to make sure scheme rules were in line with the new legislation.
Neil MacGillivray, Amps chairman and head of technical support at James Hay Partnership, was “surprised” by this move, as was Xafinity’s Jeff Steedman who commented below the story to say his firm and others “write their rules to cope with future legislation changes.”
Martin Tilley also clarified rival Dentons’ position, stating: “Our own rules are written to provide the benefits defined ‘or such other amounts permitted by legislation’ so in fact will not require amendment to allow the new pension freedoms.”
4. More evidence on long-stop need.
A freedom of information request submitted by FTAdviser sister publication Financial Adviser revealed that nearly a sixth of total adviser complaints to the Financial Ombudsman Service relate to transactions undertaken 15 years or more previously.
The figures suggest there were approximately 3,599 complaints against financial advisers, making up 0.5 per cent of the total made to the ombudsman. In 538 of these cases the advice pertaining to the complaint was made 15 years or more before the complaint was lodged.
Only 28 per cent – 150 – of these long-dated complaints were upheld.
Trade body Apfa is currently in discussions with the FCA over the introduction of a long-stop, which would prevent cases from being brought to Fos after 15 years.
5. We don’t trust politicians.
One thing was clear from last night’s televised election debate: we have no trust in politicians.
Both of the candidates to become prime minister after next week’s election were put on the back foot over the public’s trust in their economic plans.
Labour party leader Ed Miliband’s most difficult moments came when he was heckled for refusing to accept that the previous Labour government spent too much, as he struggled to defend the past Labour record on the economy.
To keep up with the election news, FTAdviser will from election day next week (7 May) be running a live blog bringing news from the sector and around the internet, which will continue each day until we get a government.
donia.o’loughlin@ft.com
