In Focus: TaxApr 1 2021

What was the most vital thing for advice in 2020?

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The single most important thing in financial services over the pandemic has been the relationship between client and planner, a senior consultant has said.

Mark Polson, founder of the Lang Cat consultancy, was speaking on the In Focus Fireside Chat about the role of advice during the Covid-19 pandemic, consolidation activity, chancellor Rishi Sunak's tax plans and how lockdown has, basically, "sucked".

On the resilience of the industry during the past 12 months, he said: "It's impossible to overstate how important [the relationship] is between client and planner. 

"Everything that happens in this sector is about an expression of that relationship, and if that had broken down [during the pandemic], then it is game over for lots of things, not least businesses like mine."

You can educate people where Peru is, but you can't educate people out of financial behaviours we don't like.

Polson said what Covid-19 had also taught us was the importance of the supply side of the sector's ability to adapt to "new ways of working, really fast.

"It turns out, what do you know, we could do it after all."

Polson also praised the front-desk element and business development managers who had to adapt quickly when it came to helping advisers and their clients.

However, he said it has also been evident that advisers and clients have voted with their feet where it was clear providers only did "half a job" or got "throttled by their risk guys".

Consolidation

When it comes to M&A activity, he said it was surprising and exciting to see so much acquisition activity during the pandemic, when conventional wisdom might have suggested people would hold back.

"I can only assume people just got a bit bored and thought 'I'd better get on with this, then'.

"That's exciting, I guess. A lot of these deals had been out there for a while and, to be fair, the consolidation activity has been a long time coming.

Tax policy in this Tax Day or the next Budget does not feel that profound.

"We have people like Bain coming in and taking LV, and Phoenix and Standard Life radically changing, and I do wonder whether some of that stasis that comes with deal-making [changed as a result of the pandemic] and people just got on with it."

He said some advisers have expressed concern about the Nucleus/James Hay deal, as reported by FTAdviser, where there might be some "fundamental changes", but, generally, advisers were pretty confident that "if something was suitable for their clients yesterday, it would be suitable for their client today".

That said, for those who are concerned, Polson added: "Don't rush, don't do anything too hasty – even if you are freaked by the activity."

It's the economy, stupid

In Focus asked that, when it comes to the nation's finances, should people be saving or spending? What sort of trends have been visible over the pandemic? 

Polson said: "An adviser I spoke with this morning said they were 50 per cent over where they thought their client's investments might be this year. 

"That extra uplift is money appearing from existing clients, suggesting there is some stockpiling going on. The question is, in your financial plan, did the planner say it was okay to splurge, or does the planner want the money in the savings pot?"

He said: "Advisers have won the last decade, for sure. Advice is incredibly important."

However, those without advice are likely to spend and splurge, indulging their delayed gratification impulses, Polson said, adding: "We can see how those without advice are likely to fall for get-rich-quick schemes. You can never legislate for stupid.

"You can educate people where Peru is, but you can't educate people out of financial behaviours we don't like. You can't imagine that if they open their mouths like baby birds, and we ram information in, they will behave in the way that we like."

I have some punishments for you.

Moreover, he said while people look for immediacy in terms of filling that economic black hole, it was also important to understand that running the economy was not like "running the household budget".

"We will be living with this for a long time, so tax policy in this Tax Day or the next Budget does not feel that profound. I think this will take a long period of time as things stutteringly get back on their feet."

He added: "But do you know what I would love with all tax stuff? Any marketeer in financial services, any of them, that writes a press release or piece of content saying, 'will this be the year that higher rate tax relief goes on pensions?' – I have some punishments devised for you. 

"They say a stop-clock is right twice a day. This particular stop-clock hasn't been right for 20 years." 

If we want people to save for pensions, then marketeers "might want to shut up" when it comes to various tax predictions that haven't come true for "decades", Polson concluded.

To view the full Fireside Chat, including references to electric shocks, cats and vanilla Coke, click on the image above.

simoney.kyriakou@ft.com