Opinion  

Tories’ small margin of victory means nothing is certain

Investment advisers have been watching to see if political turmoil has become a mini market crisis this week.

You may have spent some time reassuring clients. Meanwhile, Bank of England governor Mark Carney will no doubt take centre stage, although he does not have much ability to cut interest rates of course.

But market nervousness aside, what should advisers be worried about? Well, the obvious cash machine for politicians in this cash-strapped world looks to be tax relief on pensions.

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It is almost certain this new government will make it less generous. The second unknown, of course, is the pension freedoms. We are a little in the dark about how it is being received across the country. I happen to believe there is a significant risk it will take only a small number of horror stories to create quite a nasty context for these reforms. What that could lead to in terms of political action is difficult to foresee.

But, in more general terms, advisers can make much of the fact that they provide reassurance and stability for a significant percentage of the population.

Dare advisers start to think about demanding a regulatory dividend? I doubt this would take the form of a simple refund in fees, though most IFAs would appreciate receiving cheques rather than continuously writing them. But it would be good if this new administration would begin to understand the value of advice and take seriously at least three big costs advisers and their clients incur.

First and foremost, the compensation scheme needs a radical shake-up rather than continuing with the principle of the ‘polluter doesn’t pay’. Pension advisers, at a time when they are most needed, face a step increase in their compensation scheme fees for ‘crimes’ the vast majority of them didn’t commit.

The second area is surely the long stop, though negotiations and lobbying continue. It does undermine IFA businesses, certainly in terms of investment and funding. Advisers provide a huge benefit to their clients and a working example of what good practice looks like for the rest of the market, yet it is a consumer argument that is being deployed against change.

The final issue is surely that this government should be very careful when calling on small-to-medium-sized businesses to fund other projects such as the Money Advice Service and Pension Wise.

Advisers are part of the infrastructure for helping people make the right decisions – so with big changes in pensions and indeed welfare afoot, that is surely a vital service.

If advisers can demonstrate their usefulness, then maybe the sector can win a few more arguments with this new government and begin to grow significantly.

John Lappin blogs on industry issues at www.mindfulmoney.co.uk