Those three, plus a couple more, make up the five things you need to know about what’s been happening in the industry:
1) Ombudsman decides
This week saw a few decision notices published by the Financial Ombudsman Service, which always serve to highlight the potential pitfalls for advisory firms and providers.
Tenet came under fire for advising a client to take out mortgages on properties she owned, invest the cash and put it into a discounted gift trust.
The firm must now cough up £150,000 for advice given by an appointed representative back in 2006. It didn’t agree with the adjudicator, arguing the adviser had not recommended a particular level of risk and trustees had completed online risk profile questionnaires.
However, ombudsman John Pattinson said it was not sufficient to say the advice was suitable, because the trustees ticked the six box on a form. “This was not a box ticking exercise – it was a complex arrangement involving a lot of money, with multiple associated risks.”
Not all decisions go against the industry though, with another notice seeing the Fos backing an adviser over a client who argued that if he had been an experienced property investor he would not have sought financial advice.
Without getting into the details of the case, it once again highlights the tricky meeting of consumer expectations and the limitations of financial advice.
Less clear cut and with a far lesser award, was a case involving St James’s Place, which was upheld but only saw a £1,000 payment to reflect the “distress and inconvenience” caused to the client’s retirement plans.
This one again centered on a mis-alignment of views between client and adviser, but surrounding the implications of the lifetime allowance on his savings; something which may become an all the more common occurrence as the government continues to tinker with pension tax reliefs.
2) Ssas boom backed by annual allowance benefit
Small self-administered schemes are apparently growing in popularity, something which many providers are putting down to their inheritance tax planning benefits, following the at-retirement reforms.
The loan-back feature is playing a significant role in getting money into schemes, with Barnett Waddingham technical specialist James Jones-Tinsley explaining any interest paid back into Ssas as a result of a loan is considered to be an investment income and is therefore exempt from the annual allowance limitations.
This could continue to drive the market, given rules going through parliament that will taper the annual allowance.
