BrexitJan 16 2019

What 2019 holds for advisers

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What 2019 holds for advisers

As the new year’s resolutions are being dutifully pursued across the country and the nights are finally getting shorter, it is worth reflecting on some of the key financial events from 2018 that will continue to shape 2019.

The British Steel fiasco involving its £14bn pension fund, in which 124,000 scheme members endured a 10 per cent cut in benefits to enable the steel giant to return to profit, dominated headlines at the start of 2018 and will continue to have implications for the advice profession from both a PR and financial perspective.

Continued regulatory hardening has mounted more pressure on financial institutions, necessitating an evolution of the role they play and political pressure is adding more fuel to the fire. 

The introduction of Mifid II introduced greater transparency across the market, which threw increased focus on charges and value, challenging profitability and perpetuating price competition, something that will continue to attract attention during 2019. Furthermore, adjustments to General Data Protection Regulation placed an extra burden on smaller firms to fulfil the intricacies of data management in the modern information age.

Brexit-heavy concerns

Continuing uncertainty around Brexit negotiations has undoubtedly weighted down the stock market, business investment and consumer spending.

This year there is a risk that pensions could fall victim to ongoing Brexit negotiations, with Britons living abroad potentially in danger of having their pensions frozen.

Brexit will continue to be the ‘elephant in the room’ for financial planners, and anyone who claims to know what Britain’s relationship with the EU will resemble one year from now must have a crystal ball. 

Key Points

  • DB transfers will continue to be a hot topic in 2019 after the FCA’s ‘flawed’ review
  • Ongoing uncertainty around the terms of Brexit will be the ‘elephant in the room’
  • Intergenerational wealth and rebuilding the industry’s reputation should keep advisers busy this year

 

Our profession must continue to defend robustly its relevance and integrity, irrespective of the outcome of the ongoing Brexit talks. But much as it did throughout 2018, the personal finance profession is best advised to avoid reacting to all the political trials and tribulations in Westminster and Brussels and, instead, focus on what it does best: providing dependable financial planning to those who need it.

The Financial Conduct Authority released the results of its pension transfers review as the year drew to a close.

According to the FCA, less than 50 per cent of advice given was deemed suitable. Prime Minister Theresa May echoed the scaremongering, issuing a warning that HM Treasury and the FCA would clamp down on “rogue” advisers.

But behind the headlines lay integral flaws in how the review was conducted. Fewer than 20 firms were chosen, specifically for being the most active ones in the market and, of course, regulators specifically target what they believe to be higher risk firms or ones where they have received intelligence from other sources.

This was an insufficient sample size to fairly evaluate the performance of the sector as a whole – and by focusing solely on the most active firms the review distorted the wider picture. 

Recent concerns surrounding defined benefit transfers set off alarm bells for professional indemnity insurers, leaving many advisers facing increased premiums and excesses – and in some instances, no ongoing cover.

The market continues to be a challenge, with increased costs likely across the sector during 2019. Furthermore, the FCA’s plan to raise Financial Ombudsman Service compensation limits – without first addressing the current rising cost of providing regulated advice – threatens consumer interests more widely. 

One of the largely missed morals of the Tata Steel saga and the recent FCA warnings is the danger that we demonise financial planners at large and allow a slim minority to define the sector as a whole.

Politicians that ratchet up the rhetoric against overwhelmingly law-abiding and professional financial planners risk jeopardising the access vulnerable people have to quality financial planning advice; if the public hear a constant chorus of criticism at financial planners, they may be less inclined to seek professional guidance when they most need it.

With the outlook for the economy and Brexit anything but certain in 2019, communicating the message that the financial planning community is on the side of the public is critical to rebuilding public trust in our profession and safeguarding public best interests. 

Positive signs

Amid the gloom of a challenging year there were bright spots. Our sector showed continued progress in embracing diversity and inclusivity at all levels of seniority, while acknowledging it still has a long way to go.

The Personal Finance Society’s annual symposium highlighted the need to tackle the largest intergenerational wealth gap since records began. Access to financial planning advice for all ages is crucial in fixing this entrenched problem.

Young people benefit hugely from advice that empowers them to shape their own financial future. The elder generations can take comfort from expert financial planning on how to navigate the choppy waters of long-term care needs and ever-increasing life expectancy to ensure they achieve their goals and objectives.  

A decade since the global financial crisis, public trust in the financial planning profession is still lower than it should be, despite positive progress being made. The rhetoric used by politicians is partly to blame for this.

In 2018 London ceded its top spot as the world’s global financial powerhouse to New York, a psychological blow to the City.

But if the yardstick for measuring a place is its people, then the UK can take some comfort as 2019 unfolds.

We have world class talent and expertise in our financial planning community, and harnessing its full potential will be critical in meeting the headlong challenges of 2019.

Keith Richards is chief executive of the Personal Finance Society