Your IndustryApr 21 2017

Election and FCA mission: the week in news

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Election and FCA mission: the week in news

It’s been a quiet week with not much happening in the headlines but despite this we’ve managed to pull together something for the week in news.

1) Here we go again…

Oh yes, there was that minor issue of the snap general election which Prime Minister Theresa May called on Tuesday.

Since then there has been much speculation about what the election will mean for financial advisers.

It has been claimed that the poll – scheduled for June 8 – could result in radical reform of pensions tax relief.

Malcolm McLean, senior consultant at Barnett Waddingham, said it could result in a single, uniform rate of tax-relief for all and a reduced annual allowance of £30, 000 or less.

He also predicted that the election may lead to the lifetime allowance being abolished and/or the high earners’ annual allowance taper similarly disbanded.

It has also been forecast that this election could mean the end of the triple lock on the state pension.

But then predictions have been doing well for us recently, haven’t they?

2) FCA hopes it isn’t mission impossible

This week the Financial Conduct Authority published a slew of reports, including its mission statement, which advisers will surely use as kindling or a door stop.

Among the publications was the FCA’s sector views, which revealed that the regulator thinks consumers accessing retail investments through financial advice might not be getting value for money.

It has said that in retail investments relatively few advisers are transparent about their pricing before they sell advice, adding: "This does not incentivise advisers to compete on price and may result in limited pressure on them to reduce their charges."

In response the director general of the Association of Professional Financial Advisers said the FCA should back up its claims with proof.

At the same time the FCA also announced that it would increase adviser fees by 4.7 per cent, so there's not even any good news.

3) Adviser battles Phoenix life on fees

Closed book life company Phoenix Life is under fire from an adviser who claims the provider levied a fee on his clients that was not detailed in policy documents.

Facing criticism is what Phoenix is calling a 'notional cash factor' (NCF), used to calculate transfer values for two of the adviser’s clients.

Richard Kafton, managing director and chartered financial planner at Cedar House Financial Services, said that a 65 year old client lost 4.2 per cent off the transfer value of his pension between the time the client requested a transfer value quote in November and when the transfer amount came through in January due to a change in NCF.

But the provider said NCFs are regularly monitored in line with changing markets and can go up or down, and are reviewed at least quarterly.

4) Default in their stars

This week the Financial Services Compensation Scheme declared 19 firms in default – including 12 financial advice firms.

The list of new firms in default also includes two mortgage brokers, a caravan dealership and a taxi garage.

Two of the firms in default had been banned from carrying out pension transfers by the Financial Conduct Authority after the regulator was given information which prompted "serious concerns" about the adequacy of their pension advice.

These firms - Financial Page Ltd and Henderson Carter Associates - had a relationship with an introducer called Hennessy Jones and both were told to terminate any and all business with the company.

Financial Page is currently in administration while Henderson Carter is in liquidation.

5) The model of advice

Advisers should be required to include cashflow modelling in all advice on defined benefit pension transfers, Prudential's head of technical Les Cameron has said.

Mr Cameron claimed the move would bring rules governing defined benefit transfer advice in line with the post-pension freedoms world, in which fewer and fewer people are purchasing an annuity.

Currently, the FCA requires anyone looking to transfer out of a defined benefit (DB) scheme to complete a transfer value analysis (TVAS) report to find out the "critical yield".