CompaniesMay 15 2015

Divorce and adviser cynicism: The week in news

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Divorce and adviser cynicism: The week in news

Elsewhere, the regulator is offering more clarity on insistent pension clients, buy-to-let in the context of pensions was criticised again, and the industry was reeling from the shock of- but responding warmly to - the appointment of the new pension minister.

These are the five key themes from this week’s news:

1. Pension not safe in divorce proceedings.

After appeal following appeal, a divorcee has finally been give the go-ahead to launch a case against her ex-husband to get a slice of his multi-million pound fortune - 18 years after the divorce.

Ms Wyatt is seeking a £1.9m lump sum after claiming Mr Vince had failed to provide for their son and her other daughter. He did not initially pay maintenance when they split in the early 1990s because he did not have the funds, but has since amassed a fortune of over £100m.

The decision shows that pension and property assets may not be safe years down the line after a divorce, but if a ‘final order’ is in place, assets will be protected. Perhaps, following the final decision, this will drive people to ensure they are properly advised in this situation.

2. Advisers cynical on FCA’s ‘insistent’ stance.

The regulator revealed this week its views on how advisers can deal with ‘insistent’ clients.

The Financial Conduct Authority recommends advisers provide their advice in a concise manner, ensuring the client understands the recommendation. If the client wants to take a different course of action, the adviser should make clear the risks and be clear this is not their recommendation.

Through all three steps, documentation is key to demonstrating the route of the conversation. However advisers labelled this a “simplistic” way of doing things, mainly citing the Financial Ombudsman Service’s approach.

Greg Heath commented that the no win, no fee claims industry and Fos “like to ride a wagon and horses through such guidelines”.

Julian Stevens agreed, adding: “The FCA has already stated that it does not recognise insistent client as any sort of defence against a complaint.. and the Fos has a track record of disregarding signed disclaimers.”

We will just have to wait and see how the Fos decides to approach this, but on Twitter Mr Percival was suggesting there is at least tacit support for the approach - and the service has told FTAdviser previously that if handled well non-advised work is rarely the subject of a successful claim.

3. Government fails in tax alerting.

An ongoing issue with the pension freedoms continues to be tax implications, with this week both St James’s Place and Intelligent Pensions issuing warnings.

Tony Mudd, SJP’s divisional director for tax and technical support, reiterated his stance against withdrawing lump sums to invest in buy-to-let, stating that the rental income and yield needed to achieve the same level of income as if the whole fund remained invested in a pension make it unattractive.

He also warned if the value of the buy-to-let property rises sufficiently, it would be liable for capital gains tax when sold, while any property owned by the individual forms part of their estate for inheritance tax purposes.

Intelligent Pension’s David Trenner went further and argued the government has generally failed to mention the practicalities of taking income from policies that had not been designed to provide ad hoc payments of income.

The more cynical of us have said that while the pension freedoms are no doubt fantastic for pension savers, they are also a cash cow for the government.

4. Platforms coy on institutional.

As advisers know, it is now their responsibility to undertake extensive and ongoing due diligence on platforms they want to use. However, with many refusing to divulge how much of their business is purely advised, this makes IFAs’ jobs even more difficult.

Cofunds is sticking its neck above the parapet by declaring, with its parent company’s recent results showing out of £76bn in total assets, £37.2bn is institutional.

A spokesperson for Fidelity told FTAdviser it does not separate retail and institutional figures. A person familiar with the situation told FTAdviser that the platform has £20.1bn of assets from group pensions, out of a total of £56.7bn in assets under administration.

Clearly platforms prefer to keep these figures to themselves.

5. Surprise pensions minister.

Since last week’s shock majority for the Conservatives, prime minister David Cameron has been reshuffling and adding to his cabinet. The much-respected former Lib Dem pensions minister Steve Webb has been replaced by Ros Altmann, it was announced, following speculation that David Gauke would step in to the shoes.

Mr Gauke was reappointed as financial secretary to the Treasury.

Since the announcement, many firms have stated what they would like Ms Altmann to do with her new influence. Several that savings policy needs to be addressed - the latest of which being the Centre for Policy Studies.

donia.o’loughlin@ft.com