The last five days have seen updates of two major EU directives, speeches delivered at yet more conferences and news on the regulator’s plan to boost UK Fintech innovation.
All these and a few more things make up our traditional Friday round-up of the five things you need to know about this week in retail finance.
1) Mifid II delayed...
The start of the week saw the European Commission’s financial services director reveal the Markets in Financial Instruments Directive number two is set to be delayed by as much as a year amid “technical challenges”.
This followed news on Monday that the Financial Conduct Authority had decided not to standardise how costs and charges are disclosed by advisers and wealth managers under Mifid II requirements, in spite of “a great number” of industry firms wanting it to do so.
The EU-wide rules, scheduled to come into force from 3 January 2017, will require advisory and discretionary firms to provide a full breakdown of all fees, including the likes of transaction costs, in a standardised format.
Later in the week, the FCA’s chairman John Griffith-Jones called the delay a “sensible” measure, although he defended the new directives as having merit and being well designed.
2) ... while lenders gear up for Mortgage Credit Directive
In the mortgage market, UK banks and building societies have finally started sharing how they plan to implement the Mortgage Credit Directive, set to come into force in six months time.
Lloyds, and the various brands within its group, stated it would be ready by 21 March, but there was still work to be done around the new explanatory documents, foreign currency changes and new rules for consumer buy-to-let.
Later in the week, Natwest confirmed it would be up to speed by January, replacing the Key Facts Illustration’s with the new European Standardised Information Sheets, to be known in the UK as the Mortgage Illustration, to minimise any “pipeline impacts”.
The bank also noted that as a result, consumer buy-to-let demand is expected to be low, so it will hold off making decisions on whether to introduce the option until towards the end of next year.
Meanwhile, at the Council of Mortgage Lenders’ annual get together, chairman Moray McDonald branded the new regulations as a “complete waste of time”, paraphrasing Winston Churchill to add “I propose the motion that never has so much been done for the benefit of so few people” - to resounding agreement from the audience.
3) Older borrowers deserve better
Sticking with mortgages and also at the CML’s conference, the FCA’s director of retail supervision and authorisations Jonathan Davidson warned the number of people aged over 80 is set to more than double in the next 25 years, meaning an increasing demand for a broader range of products to meet these changing needs.
He said that the regulator was keen to support innovation in the area of lending into retirement, which should be seen as much as an opportunity as a threat for lenders.
Later in the week, the Building Societies Association responded by committing to review maximum age limits on mortgages, as one of several suggested ways to support those needing loan finance into and in retirement.
4) Fintech gets a boost
On Tuesday the regulator put a bit more meat on the bones of its plans to create a ‘sandbox’ for firms to let consumers play with its new products in, free from the consequences of enforcement action, but with the promise of restitution should anyone get hurt.
While the proposals fall short of a complete ‘safe harbour’, the fintech industry broadly welcomed this fairly unique and forward-thinking move from the much-maligned FCA.
The emerging industry’s biggest cheerleader, economic secretary to the Treasury Harriet Baldwin, used a speech at the BSA’s annual lunch yesterday (12 November) to further praise the progress made.
“Not only does financial technology or fintech make peoples lives easier and promote competition, it can also deliver a major boost to the UK’s industry,” she commented.
5) Complaints continue
Finally, it would appear not a week can go by without a provider coming up against advisers or the authorities.
Monday (9 November) saw Lighthouse lose in its challenge against a Financial Ombudsman Service ruling that it should have given a client a full refund of advice fees, plus 8 per cent a year interest.
On Wednesday (11 November) it was Scottish Widows up against it, as advisers claimed that the firm continued to refuse disclosing clients’ pension input periods, despite IFAs having full authority to ask for such information.
Finally, yesterday an adviser branded Phoenix Life as “offensive” after the legacy life company refused to supply him with information about a client’s pension scheme and told us his company has links to a pensions liberation firm.
peter.walker@ft.com
