Two years ago at Pimfa we launched our Members’ Manifesto, following in-depth member collaboration and feedback, to outline our mission and approach as a newly reformed association with an expanded remit.
The purpose of the manifesto was to provide a blueprint for the future of the sector and a focus for the trade association.
When we originally launched the manifesto, we said it would be a document that would be revisited to take account of strategic developments.
No one can be in any doubt that fast-paced developments within the industry have been accelerated as a result of the Covid-19 pandemic during 2020. Such developments have, as a result, necessitated a recalibration of the manifesto.
Once again this has been the result of our in-depth engagement with members, which continues to rise exponentially as we embrace a virtual world and I am grateful for the input we have received to help us refine the Members’ Manifesto.
This revised focus in the next few years will direct our work to influence the creation of the optimal operating environment the wealth management and financial advice profession needs to provide a vital service to individuals, families, charities, pension funds, trusts and companies.
This is even more pressing given the economic uncertainty we are likely to experience in the coming year(s).
In this vein, Pimfa’s top priority remains reform of the Financial Services Compensation Scheme levy, professional indemnity insurance and the future of supervision.
Without reform of the levy, more adequate supervision of companies and a ban on businesses ‘phoenixing’, there is a danger more consumers will be excluded from financial advice at a time when they may need that advice more than ever.
We know too many people already believe financial advice is out of their reach, or that it will not make a material difference to their lives. We also know many find financial matters daunting or a cause of anxiety.
At the same time, we know the benefits financial advice offers. Research shows that those on lower incomes who receive financial advice see a 24 per cent boost to their pension wealth on average compared to those more wealthy.
We also know that people receiving advice are, on average, £47,000 better off over their lifetime and that those who have an ongoing relationship with a financial adviser will be 50 per cent better off during their lifetime than those that receive advice only once.
But, as our own recent research shows, ever-increasing PII premiums, as a result of market distortions caused by, among other things, inadequate supervision from the Financial Conduct Authority, and the resultant rise in calls for compensation on the FSCS leading to annual hikes in the levy pose an existential threat to advice companies.
As their own costs rise their only choice becomes to increase the cost of advice – or as in the case of defined benefit pension transfers, simply refuse to offer it at all – or go out of business.
This is a vicious circle that, over time, will only exclude more people from financial advice and, significantly, will exclude those people likely to benefit from it most.
For mid and large-sized companies, at a time when the ever-increasing need for digital advances, and the creation of innovative solutions to support intergenerational wealth transfers and talent and skills development requires significant investment, the size of the fee severely impacts innovation.
In the coming year you will see more in these areas as Pimfa focuses on the sector’s future and issues such as the impact of Brexit, ethical investing, digital transformation, diversity and inclusion and talent.
As ever, there is much to do.
Liz Field is chief executive of Pimfa
