CompaniesJul 24 2015

Ombudsmen in the spotlight: This week in news

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Ombudsmen in the spotlight: This week in news

The summer news cycle refused to slow down this week, with ombudsman decisions, ‘robo advice’ and the fallout from Martin Wheatley’s departure all keeping us busy.

So, as per usual, here is our round-up of the most important themes of the last five days:

1. Vindication for Sipp provider.

Making a pleasant change from transfer/liberation complaints, this week the Pension Ombudsman published a decision relating to self-invested personal pensions.

The ombudsman ruled in favour of provider Yorsipp after an advised client complained he lost £40,000 as a result of the provider failing to monitor the performance of an investment.

The complainant had signed up for the Sipp without reading the details - crucially that his now defunct IFA would regularly review the portfolio - and he also twice declared he was a professional investor.

The plot was thickened by the fact the complainant’s advisers were also directors of the firm where his Sipp invested money via an unsecured loan to fund commercial litigation.

“In my view, the checks which Yorsipp undertook were adequate to meet the requirements imposed on them by the FCA and HMRC for such investments at that time,” stated ombudsman Anthony Arter.

“I am also persuaded that Yorsipp reviewed their business in light of the findings of the 2009 thematic review and that they have robust systems and controls in place allowing them to monitor the investments made by their clients.”

2. Refund ruling riles adviser.

Meanwhile, an adviser complained that a recent decision by the Financial Ombudsman Service ordered his firm to pay more than £1,000 to an individual he had never advised.

The adviser stated the fees they received were given to the complainant’s previous IFA.

The ruling is a long and complicated one, so probably best to read through the details here, but suffice to say that all sides are not best pleased and the decision has not done much to restore adviser faith in Fos.

3. Wheatley reacts to sacking.

Following the surprise announcement of plans for his exit last week, Financial Conduct Authority chief execuive Martin Wheatley was able to expand a bit on his time with the regulator during their annual public meeting on Wednesday (22 June).

He expressed his disappointment at having to move on and also opined on how the Retail Distribution Review has “not solved all the problems” during his tenure, with more work needed in the adviser market.

FTAdviser asked various industry stakeholders what they thought RDR had failed to achieve. They came back with a fairly comprehensive list of areas in which the RDR has improved things, along with problems yet to be solved.

The latter included the labelling of advice models, the increased cost of regulation of IFAs and the contraction of adviser numbers in the years since the RDR requirements came into force.

As Lucy Frew, head of financial regulatory at law firm Kemp Little, explained the so-called ‘advice gap’ has not been closed, with the FCA seeking to build on the findings of last year’s Europe Economics report.

“Simplified advice models and technology solutions such as self-directed and automated advice are positioned well to serve those with less to invest and who are unable or unwilling to pay for advice, but the FCA will need to ensure that these do not bring their own issues to the retail advice sphere,” she commented.

4. Rise of the robos.

This brings us nicely on to another big issue tackled on the site this week. While many hate the term, it would appear that the use of robo-advisers, or even cyborgs, to help people find the right financial products are making science fiction a reality.

FinaMetrica co-founder Paul Resnik told us that these “disruptive” technologies will fundamentally change retail financial services and that he was spearheading the change with a new investor profiler, aiming to be a best practice suitability process for both robo and cyborg advice.

Thankfully for the, as yet uninitiated, he was also kind enough to explain the difference: robos being direct to the public short tests to help individuals articulate their needs and match to multi-asset portfolios, while cyborgs largely use the same process but with some human intervention.

While many fear this change, Thomas Miller Investment private client partner Matthew Brown reassured advisers that existing retirement modelling and appetite for risk tools are not that far away from the next generation of artificial intelligence enabled services.

“Technology will develop further and dominate the mass-market and the adviser community will largely carry on as it does now, just using technology to make themselves more efficient and profitable,” he commented.

5. The ‘third way’ is coming.

Finally, another big development on the horizon, is the much-discussed ‘third way’ of retirement products, which attempt to blend the best of drawdown flexibility and guaranteed income.

At the start of this week, Aegon rolled out a new product on its platform, which combines the key benefits of both an annuity and flexi-access drawdown.

They appear to be the first to do so in the UK, but are unlikely to be the last in response to the at-retirement reforms in April.

However, one criticism of these products is the cost, with Aegon’s new product offering two SRI managed volatility funds with total charges of between 1.73 per cent and 2.38 per cent.

peter.walker@ft.com