Wednesday, 30 December 2015

Govt more than £600m behind tax avoidance targets

2014-Budget-George-Osborne-Walking-700.jpg

Government measures to clamp down on tax avoidance are bringing in £615m less than originally forecast, according to an analysis from the Office for Budget Responsibility.

In an investigation of successive measures to clampdown on avoidance introduced since 2010, the OBR found that none of the plans had brought in more than expected, with many falling below targets.

Reviewing 39 announced changes introduced by the Conservatives since they first entered power in 2010, the OBR said: “Most measures are within £50 million of the original estimate either way, but that there have been five measures where the average yield is lower by more than £50 million a year.

“No measures have significantly outperformed the original costing.”

18 of the 39 measures were found to be yielding less than expected, producing a total shortfall of £834m, while 10 were exceeding forecasts by £219m, resulting in an annual overall shortfall of £615m.

In particular, the OBR found that plans to raise revenues through new disclosure facilities for Crown dependencies in Jersey, Guernsey and the Isle of Man would now raise around 20 per cent less than expected, equivalent to £50m a year.

Similarly, while a 2010 plan to reduce fraud and error in tax credits was expected to raise £350m, the OBR said it was instead generating savings of £200m.

And a crackdown on onshore employment intermediaries has also yielded £300m less than expected in the last two years, although the OBR adds this is expected to improve from 2016/17.

In his most recent Budget, the Chancellor promised to devote money raised from efficiencies at HMRC to further avoidance measures.

The analysis comes months after the Institute for Fiscal Studies accused the Conservatives, Labour and Lib Dem parties of using “made up assumptions” for increased revenue from avoidance clampdowns as part of their election campaigns.

A Treasury spokesman could not be reached for comment.

Tuesday, 29 December 2015

The biggest FCA fines of 2015

FCA logo new 3 620x430

The FCA imposed a total of £905,219,078 in fines in 2014 against 39 firms. The level of penalties marks a 38 per cent fall on the £1.4bn issued in fines in 2014.

Banks continued to pay the price for foreign exchange failings, as well as manipulating Libor rates.

Issues around complaint handling related to missold payment protection insurance also saw record fines.

But it was not just the banks that got hit, with major fund groups also paying the price for regulatory failings.

Here is our breakdown of the biggest FCA enforcement cases this year.

10. Ex-hedge fund chief executive Alberto Micalizzi – £2.7m

Former hedge fund Dynamic Decisions Capital Management chief executive Alberto Micalizzi is the only individual to have a multi-million pound fine issued against him this year.

He was banned and fined in July after appealing the decision against him.

The Dynamic Decisions fund was marketed as having a low risk, highly liquid strategy. But in the last few months of 2008 during the financial crisis the fund suffered massive losses amounting to approximately 85 per cent of its value.

Micalizzi sought to conceal these losses from investors by deliberately misrepresenting the fund’s value.

9. Threadneedle – £6m

Threadneedle Asset Management was fined over £6m earlier this month over failing to put in place adequate controls in its fixed income business.

The failings allowed a fund manger on the emerging markets debt desk to initiate, execute and book a $150m trade which, had it settled, could have caused a $110m loss to the relevant client funds.

Threadneedle also failed to provide accurate information to the regulator and failed to correct this for four months.

8. Merrill Lynch International – £13.3m

In April the FCA imposed its highest fine for transaction reporting failures on Merrill Lynch International.

The firm incorrectly reported over 35 million transactions, and failed to report a further 121,387 transactions for seven years.

Merril Lynch was privately warned about its misconduct in 2002, and fined £150,000 in 2006.

7. Aviva Investors – £17.6m

Aviva Investors Global Services was fined £17.6m in February for failing to manage conflicts of interest.

A total of £132m has been paid in compensation to eight affected funds to ensure none of the funds were adversely impacted.

The regulator found that Aviva Investors operated systems which were open to abuse and allowed traders to “cherry pick” funds which paid higher performance fees.

6. Clydesdale Bank – £20.7m

Clydesdale Bank was hit with a £20.7m fine in April over the way it handled payment protection insurance complaints.

The failings date back to mid-2011 when the bank’s policies meant that complaint handlers did not search for documents in relation to mortgages and loans repaid more than seven years prior to the complaint.

But in some cases relevant documents were available.

Between May 2012 and June 2013, Clydesdale also provided false information to the Financial Ombudsman Service in response to requests for evidence of the bank’s PPI records.

5. Barclays – £72m

In November the FCA issued its largest ever fine for financial crime failings against Barclays.

The bank agreed a £1.9bn transaction for ultra high-net-worth clients in 2011 and 2012.

The transaction was dubbed the “elephant deal” internally, and netted the bank £52.3m.

4. Lloyds Banking Group – £117m

The regulator imposed its largest ever retail penalty in June after Lloyds failed to properly handle PPI complaints.

The bank’s staff were told to assume its sales processes were compliant and robust, which led to complaint handlers unfairly rejecting cases or failing to fully investigate them.

As a result Lloyds reviewed or chose automatically to uphold around 1.2 million PPI complaints, and set aside £710m for redress.

3. BNY Mellon – £126m

Bank of New York Mellon was fined £126m in April for failing to comply with client money rules.

Firms are required to keep records of client accounts and state which division the client monies relate to. Instead BNY Mellon used global platforms to manage custody of assets.

Following the Lehman Brothers collapse in 2008, the FSA required chief executives to confirm they complied with the client money rules.

2. Deutsche Bank – £227m

The FCA fined Deutsche Bank in April for manipulating Libor and Euribor. Combined with fines imposed by US regulators, the total penalties against Deutsche Bnk were £1.7bn.

The FCA revealed a number of incriminating messages between traders, including one request to a Libor submitter which said a low fix “would be the best xmas present”.

  1. Barclays – £284m

The second appearance for Barclays, the bank was fined £284.4m after traders used chat room to manipulate foreign exchange rates.

The penalty was the largest every imposed by either the FCA or FSA.

After reaching settlements with US regulators, the bank paid a total of £1.5bn in fines.

Certain groups of traders described themselves as “the players”, “the 3 musketeers”, and said “we all die together”.

Tuesday, 22 December 2015

MAS slashes marketing budget; unveils plans for ‘assisted digital’ guidance service

Rookes-Caroline-MAS-2013-500x320.jpg

The Money Advice Service plans to slash its marketing budget for next year by more than 50 per cent as it sets out its response to the Farnish Review.

The MAS has today published a consultation on its business plan for 2016/17. The plan outlines proposals to cuts its total budget by £6m, from £81.1m to £75.1m.

The ‘money guidance’ budget will be reduced by £4m, from £34.1m to £30.1m, while the debt advice budget will fall by £2m, from £47m to £45m.

The biggest spending reduction comes through marketing, which will be slashed by 55 per cent from £8.8m to £4m. It will be the second year in a row the marketing spend has been drastically reduced.

The MAS has also confirmed it has ceased “all dedicated brand building marketing”.

“Instead, customer communications will seek to co-ordinate partners,” the MAS says.

“This co-ordination will address social norms about spending and saving; and topical money issues that can engage consumers with their money.

“We will particularly focus piloting, testing and learning on segments that are disengaged from managing their money.”

One idea the MAS has piloted is an “assisted digital” service that combines website information with telephone support, without straying into regulated advice.

The MAS says: “After customers have read complex information on financial guidance websites about products, some of those customers may still need support that reduces confusion and helps them to take action.

“Thanks to the interest and involvement of moneysavingexpert.com, we ran a pilot for six weeks of just such a service. An invitation to call a dedicated Money Advice Service helpline was embedded at key points in moneysavingexpert.com pages dedicated to helping consumers choose basic bank accounts, cash Isas, savings accounts and credit card
balance transfers.

“The pilot showed that there was a low but focused demand, and that we could meet the customer need without straying into regulated advice.

“We are reviewing the pilot results in the light of our budget for next year. But we think an operational version of this service, offered to financial guidance websites that aim to educate and inform consumers about product choice, could be a promising way of bringing the support offered by a helpline to customers that need it.”

In addition, the MAS has embedded a new strategic objective – ‘Improving access to guidance and advice’ – in its business plan.

The pledge means that over the next three years the MAS will work to “enable more people to access the right information, advice or guidance when making financial decisions”.

The Treasury is currently consulting on how public financial guidance should be structured and funded. The consultation is running alongside the Financial Advice Market review.

In its response, published yesterday, Apfa called for the Money Advice Service, The Pensions Advisory Service and Pension Wise to be merged.

Monday, 21 December 2015

CML elects new chairman

2094941_Business-Handshake-Finance-Deal-700

The Council of Mortgage Lenders has appointed Leeds Building Society chief executive Peter Hill as chairman for 2016.

Hill succeeds Royal Bank of Scotland’s Moray McDonald, who held the role at the trade body during 2015.

Hill says: “We are set for another big year in the mortgage industry. The Mortgage Credit Directive takes effect from the end of March; the Financial Conduct Authority is embarking on an examination of competition in the mortgage market; significant tax and likely regulatory changes are being introduced in the buy-to-let sector.

“And we are determined to keep up momentum on our collaborative approaches to improve retirement lending and mortgage cost transparency; these have great potential to benefit both consumers and lenders.

“Against this busy backdrop, we are also working through the ramifications of a potential merger with other trade bodies, as proposed by the Financial Trade Associations Review. This is a significant decision for the CML, on which our members will vote in the first quarter of 2016.

“As incoming chairman, my dual aims for the year are to ensure that any organisational change does not detract or distract from our normal focus on services and representation in the short term, and that any change is for the benefit of all CML members in the long term.

“I am grateful to Moray McDonald for steering the CML through this landscape so far, being mindful of the needs of members of all sizes, types and different business interests.”

Friday, 18 December 2015

Govt casts its shadow over the FCA

FCA logo new 620x430.jpg

2015 was the year the Government cast a looming shadow over the FCA, from dictating the regulator’s workload to ousting its senior management.

The controlling hand of Government in regulatory affairs was made abundantly clear in July when it was announced that FCA chief executive Martin Wheatley would be stepping down. A statement from Chancellor George Osborne thanked Wheatley for his tenure but added: “The Government believes different leadership is required to build on those foundations and take the organisation to the next stage of its development.”

Independent regulatory consultant Richard Hobbs says: “The Government has fallen very much out of love with its regulator, and as a result there are going to be significant changes. It seems like the banking lobby is finally being listened to.”

The Government also set the tone on the FCA’s priorities. Following the rollout of pension freedoms in April, the FCA was charged with putting in place a framework to govern Osborne’s flagship reforms.

In July, Money Marketing revealed the types of pension freedoms complaints consumers were bringing to the Financial Ombudsman Service. Complaints mainly centred around the way providers were allowing consumers to access pension freedoms, poor service and delays and frustrations over the requirement to take advice for safeguarded benefits worth more than £30,000.

But the dominant issue has been insistent clients. Advisers have been concerned about future liabilities should they process a transfer despite advice not to do so, and the FCA was forced to issue guidance on dealing with insistent clients in June.

But law firm DWF partner Harriet Quiney is not convinced the insistent clients challenge has been resolved.

She says: “There is more clarity than there was but a lot of people are still concerned about what to do if an insistent client approaches them. A lot of networks have taken the view they will not advise insistent clients because it’s just too risky. They don’t feel confident that if they give appropriate advice, but ultimately do what the client wants, that they will be protected in the long run.”

The disquiet over insistent clients and pension transfers has also extended beyond the advice market to Sipp providers. In May, Money Marketing reported how Sipp providers were coming under increasing pressure to intervene on pension transfer advice, and block transfers out of defined benefit schemes that are not in clients’ best interests. The contested case of Berkeley Burke, in which the Financial Ombudsman Service found the provider had failed to carry out adequate due diligence on an unregulated collective investment scheme, continues to be reviewed by the FOS.

Quiney says: “There is a big concern around how the FOS seems to be forcing obligations on Sipp providers. For a Sipp provider to be told they should have told a client an investment was unsuitable is frankly ridiculous.”

EY senior adviser Malcolm Kerr says: “2015 revealed a major challenge for the regulator: ‘how do you regulate the unregulated?’ For example, Sipps, where the data is around the wrapper not the unregulated product. Or pension freedom scams. Or, dare I say it, leveraged film finance investments.

“Add these issues to the concerns raised by the wealth management thematic review, and many other ongoing inquiries, and 2016 will see lights burning in the windows late at night at the FCA.”

Expert view: Richard Hobbs

Despite the fact there has not been a change of Prime Minister or Chancellor, we have had a change of Government at the general election. It became clear it was the Lib Dems who were driving a lot of financial services public policy, such as banker bashing, and it’s people like Vince Cable who were keeping Martin Wheatley in a job.

Our politicians play a rather sophisticated game. They create arm’s length regulators so they do not get the blame when things go wrong. But when things do go wrong and they think the regulator is at fault, they quickly start to influence the agenda. If you do not dance to the Government’s tune, as happened with Wheatley, then you will quickly find yourself dumped.

The mood music has changed, both at a UK and European level, and now the conversation is not about more regulation, it’s about potentially having too much.

Whether there is significant deregulation or not remains to be seen, but it looks like the high tide mark for regulation has been passed.

Richard Hobbs is an independent regulatory consultant

Thursday, 17 December 2015

Robert Reid: Large firms should not receive special FCA treatment

ReidRob

The news that consolidators are under the microscope is long overdue. The number of times I have been told of an acquisition triggering a mass transfer of assets where ongoing charges increase with no corresponding increase in services is far too common to be apocryphal.

Just how this works as suitable advice I have no idea.

But should it surprise us when we operate in a market that has been remuneration focused for so long? People talk glibly about being client focused but few really practice it given their wish to avoid any discussion over fees or costs versus services delivered.

Then there is the issue of moving assets from one platform to another when you take over a client whose previous advice included investments.

If the money is moving Sipp to Sipp or Isa to Isa it is of no issue but where it is a general investment account or an investment bond then its movement will be restricted by the taxation due on its liquidation.

I would be shocked if those using these “locked in” portfolios have ever explained their taxation-led illiquidity when confirming them as suitable. In my opinion, there is little difference between locking people in and taking less than transparent or obvious charges. Both are as far away from treating customers fairly as you can get.

So the FCA needs to act and make sure that size does not mean special treatment. Just because a corporate business model needs cash flow from inaction to survive does not mean it is right for them to act like Vikings pillaging with no fear of being exposed or called to account.

When he was FCA chief executive Martin Wheatley stated he favoured fixed fees over those linked to value and contingent on sale of product. I do think he is partly right: we need to be paid for what we do but we also need some element of risk premium. A mix, not a swap, is where I sit in this discussion about change.

The last generation thought the banks could do no wrong. Regrettably, the banks were not interested in looking after them until they had safeguarded their profits, as their focus had never ever been on client outcomes.

In order to make this step change, the general public needs to understand that they need advice. They also need to realise that, while robo-advice may reduce costs, it sure as hell will not hold their hand when the market drops. We need to engage them then educate them if we are truly to move to a client-centric market. Indeed, there is little point in changing the market if we do not take the public with us.

In closing, next year sees me having completed 15 years as a columnist with Money Marketing. In my first column of 2016 I intend to look back to the start to see what, if anything, has changed.

May I wish us all a lighter regulated year to come – if not from rules, at least from demands for fees and so on. Best wishes to you and yours for the festive season.

Robert Reid is director at The Ideas Lab

Wednesday, 16 December 2015

Ascentric delays £4m tech upgrade

Tablet-Technology-Computer-Business-700x450.jpg

Ascentric is delaying the launch of its £3.9m technology upgrade until next year to conduct more tests on the software.

The technology, called Project Accelerator and provided by Bravura, was originally due to be launched in September 2015, then in October 2014 the date of the launch was postponed to the end of 2015.

Ascentric, which is owned by Royal London, will delay the launch to test the software “properly” before advisers access it, says a Royal London spokesperson.

However, the firm has not set a deadline for the launch of Accelerator.

Ascentric chief executive Jon Taylor says: “We have delayed Accelerator into next year to ensure we carry out a robust testing programme before going live.

“We are keen to ensure we deliver the best quality platform for our customers with the high standard of service they expect.”

Ascentric is the 11th-largest platform in the UK by assets under administration, with £9.6bn as at 30 June.

Tuesday, 15 December 2015

Nucleus reports 26% surge in Q3 operating profit

Money-Cash-Coins-GBP-Pounds-UK-700x450.jpg

Nucleus has seen its operating profits climb from £1.9m to £2.4m for the third quarter of 2015.

The improvement represents an increase of 26 per cent, although including a £1.2m one-off credit operating profits rose by almost 90 per cent to £3.6m

Gross inflows for the quarter reached £1.54bn, up by four per cent on a year-on-year basis from £1.48bn.

Assets under administrations increased 16 per cent to £8.7bn, up from £7.5bn, while turnover increased 30 per cent from £17.2m to £22.3m.

Nucleus chief executive David Ferguson says: “Our latest set of financial results shows continued forward and steady momentum and we are on track to end 2015 in a better than ever financial position.

“This is particularly pleasing given the last year or so has seen us transition our underlying technology; materially strengthen our senior team and agree a new back office administration contract.”

Government halves pensioner bond payouts

Elderly-People-Paperwork-Old-Pension-Pensioners-700x450.jpg

Returns for “pensioner bonds” issued by the Government are set to plummet by almost half.

The bonds were issued by the Government in two tranches from January this year, with the first set to mature next month.

However, because the products were a special issue, while savers were offered an interest rate of 2.8 per cent on investment earlier this year, those who roll over their savings into a standard guaranteed growth bond next month will now get just 1.45 per cent.

The bonds were introduced by Chancellor George Osborne as part of the 2014 Budget in a bid to encourage saving among over-65s.

As well as the one-year bonds which will begin to mature next month, investors were also offered a three-year bond, which pays 4 per cent interest to January 2018.

An NS&I spokesman says: “65+ Bonds were a special Issue designed to support older savers over a 1-year or 3-year investment term. As with all our standard products, the interest rates on NS&Is Guaranteed Growth Bonds are set to balance the interests of savers, taxpayers and the wider market whilst offering a 100 per cent guarantee.”

Monday, 14 December 2015

Aegon revamps default pension funds

Money-Cash-20-Note-Currency-UK-700x450.jpg

Aegon has launched a new range of default funds for its workplace pension schemes in response to the pension freedoms.

The five funds have platforms charges of between 0.05 per cent and 0.4 per cent.

They all use Aegon’s “flexible target glidepath” which targets three retirement income decisions in the final six years of saving.

The flexible strategy is for people planning to go into drawdown, annuity for savers who want a guaranteed income and a cash target is aimed at schemes with very small pots.

At retirement the flexible strategy leaves around 26 per cent in equities, 49 per cent in fixed interest and 25 per cent cash.

All Aegon’s existing workplace funds – which targeted annuities through lifestyle strategies – remain available.

Aegon investment director Nick Dixon says: “Auto-enrolment means that 80 per cent of workers now view their workplace pension as their main method of saving. As around 72 per cent stay in their scheme’s default fund, we must offer high-quality investments for those who don’t make active investment decisions.

“Within five years advisers estimate only 25 per cent of people will look to purchase an annuity at retirement. The dramatic shift in investor behaviour means traditional lifestyle funds which target an annuity by moving into long gilts no longer serve ‘typical’ workplace investors.

“Risk reduction using a diversified investment strategy tends to offer better returns for less risk, especially where investors delay or phase into retirement, and where they choose drawdown.”

Friday, 11 December 2015

Nick Bamford: The importance of common sense

“When a client engages you to do their financial plan they pretty much expect it to be delivered there and then.” These were the words of a consultant we saw recently to help us review the systems and processes we use to deliver financial plans to clients.

The advice was very apt as we were staggered to learn our six-step financial planning method contained 164 process steps. We were also shocked to identify the fact the process can take up to 25 weeks to complete. Any client expecting immediate delivery is going to be very disappointed.

Of course, a lot of that 25-week timescale is taken up by waiting: waiting for the client to respond or for product providers to deliver information we have requested. But while some of what we need to do involves managing client expectations, we also need to look inwards and ask ourselves how we can improve.

The exercise of analysing “how we do things round here” enabled us to begin to answer two important questions: how do we do it quicker? And how do we do it better?

I spoke about this at the Personal Finance Society financial planning symposiums in November and found many other planners were having the same experience. Just about everyone agreed we all want to deliver the very best advice in a profitable manner. System and process design is an integral part of ensuring a really good client experience and, at the same time, delivering that profitably.

The exercise enabled us to change the way we did things in order to cut out some of the delay. For example, issuing letters of authority at the same time as we send the engagement letter to the client, rather than waiting for engagement letters to come back before sending authority letters. Also, getting the administration team to ask our paraplanner to sense-check the quality of data received back from the product providers as each piece comes in, rather than storing it all up. These two simple process step changes shaved a valuable 10 per cent off of the 25-week timescale.

A lot of what we learned can be safely placed under the label “common sense” but it is amazing how much attention-based blindness there can be in a firm. We spend so much time being so focused on doing the job in hand we do not step back and spot the important stuff that can be improved for the benefit of both the client and the firm.

Common sense or not, the worst you can hear from any member of a team is, “This is the way we have always done it.” Constant improvement of processes is just one of the ways we can achieve the client-centric aim of the very best financial planning and the firm-centric aim of being more profitable.

Nick Bamford is executive director at Informed Choice

Thursday, 10 December 2015

Smarter Business Innovators: Lift-Financial’s Joel Adams

Adams-Joel-Lift Financial-620x430

For Lift-Financial joint founder and chief executive Joel Adams the workplace is the perfect hunting ground for new clients. The firm, born out of a management buyout from Chartwell in 2007, now has more than 50 staff, many of whom are engaged in delivering advice and services to the members of the corporate pension schemes it oversees.

And while the private client focus will always be on the top earners, employees of all types are becoming personal clients of the firm.

What are the benefits of finding new clients in this way?

The workplace is a fantastic way to build up your private client bank. We have found it is far easier to get one client who employs 100 people who could all become private clients than go and target 100 potential private clients directly.

Coming in through the workplace also gives the employee a sense that we have the tacit endorsement of the employer. It suggests they have done some due diligence in selecting us. Many employees in City firms understand more about financial services than a lot of financial advisers, so you have to demonstrate the highest professional standards. Being a chartered firm with chartered advisers has proved invaluable for us.

What are the key areas of engagement? Is it all about auto-enrolment?

The pension scheme has been the lead conversation in recent years but nowadays we are leading on financial education. Saying that, the biggest draw recently has been seminars around the annual tapering allowance. Out of 60 people who have registered for our latest annual tapering allowance session, 33 have requested a one-to-one conversation as well.

We also have sessions for younger members of staff where we look at repaying student debt and saving for a house. Whether the conversation is about mortgages or pensions, we create the opportunities through financial education sessions.

As dynamics such as smarter technology, robo-advice and the potential for advice-lite from the Financial Advice Market Review play out, how do you think the firm will have to adapt to remain relevant?

The Financial Advice Market Review is looking at simplified advice and we think it has a place. It is a market we are very interested in. We could use this to scale up our operations to see more people.

Regarding technology, we have invested in a bespoke system through Intelliflo, going live in January, which will help us get closer to clients receiving full advice. If the time comes when the world is dominated by robo-advisers, we will be so close to our clients that they will not want to move.

The new system means we will be able to operate more efficiently and more cheaply. It will mean we will have a full transaction history and we will be able to give time and money-weighted returns. At the moment, we cannot give a clear picture of the overall return we have given the client, but in future we will be able to demonstrate the value we have delivered.

What do you think the future holds for adviser charging?

We believe one day all firms should have to operate in a way that is fully aligned with the client. Adviser charging requires the adviser to sell something to get paid, even if not buying something is the best thing to do. Having to make a product sale means you cannot be 100 per cent independent.

Wednesday, 9 December 2015

Govt pushes ahead with plans to name and shame serial tax avoiders

HMRC-HM-Revenue-Customs-700x450.jpg

The Government has decided to roll out plans to name and shame serial users of tax avoidance schemes despite concerns the power is unfair and disproportionate.

In a consultation paper published in July, the Government set out a raft of proposals aimed at tackling those who “persist in engaging in tax avoidance”.

One of the measures suggested was to publish the names of the most persistent users of tax avoidance schemes where HM Revenue & Customs has challenged the use of the scheme and won.

The Government said serial avoiders would be defined as those who had entered into three or more tax avoidance schemes during a five-year “warning period”, which are later defeated by HMRC.

In a response document published today, the Government says “only a minority of respondents believed that public naming of the most persistent users of tax avoidance schemes that HMRC defeats would be a fair and effective deterrent.”

Respondents raised concerns that naming those who used tax avoidance schemes suggested they had carried out illicit behaviour, even if they believed they had acted within the law.

Others suggested there should be some form of tribunal approval before names are published, or that there should be a right of appeal against a decision to name and shame.

But the Government has rejected both these submissions.

In the response paper, the Government says: “The Government notes these views. It believes the potential naming of serial avoiders will be a useful tool to counter serial avoidance.

“The Government believes neither a right of appeal against a decision to name nor a requirement for a tribunal to approve naming would be appropriate.

“However, HMRC should advise any taxpayer if they are considering publishing that person’s details and give a suitable time for the taxpayer to make any representations as to why their details should not be published. Once a person’s details are published by HMRC, they will be removed from publication after 12 months.”

Tuesday, 8 December 2015

Eurozone GDP grows 0.3% in Q3

EU-Euro-Europe-Eurozone-700x450.jpg

The eurozone economy expanded by 0.3 per cent in the third quarter of this year compared with the previous quarter, according to the latest estimates by Eurostat.

However, GDP growth for the wider European economy was higher at 0.4 per cent for the same period.

Compared with the same quarter of the previous year, eurozone GDP rose by 1.6 per cent and by 1.9 per cent in the 28-member economy.

Rising inventories and higher household spending were the main drivers behind eurozone economic growth in the third quarter, despite negative trading.

During the third quarter of 2015, household consumption expenditure rose by 0.4 per cent in the euro area, says Eurostat, and by 0.5 per cent in the wider Europe region, compared to 0.3 per cent and 0.4 per cent respectively in the previous quarter.

Inventories also rose 0.2 per cent for the same period in the eurozone, compared to a 0.2 per cent fall in the second quarter.

In the eurozone, exports declined from 1.6 per cent last quarter to 0.2 per cent in the third quarter this year, while imports increased by 0.9 per cent in the euro area and by 1.4 per cent in the 28 member states compared with 0.9 per cent and 0.3 per cent respectively in the second quarter of this year.

Monday, 7 December 2015

Artemis’ Cormac Weldon: Earnings will start growing in the US next year

The head of Artemis’ US team explains why he is holding cyclical stocks (like semi-conductors) while also investing in growth (videogame producers, Amazon).

Friday, 4 December 2015

From postroom to boardroom: B&CE chief Patrick Heath-Lay on making auto-enrolment pay

“If you walk down any high street in the country, just about every third retailer is saving with us,” says Patrick Heath-Lay. It is almost as though the B&CE chief executive does not quite believe his firm, which runs automatic enrolment scheme The People’s Pension, is responsible for one in three of everyone enrolled so far.

If he is still coming to terms with the growth of the provider, he can be forgiven. Before auto enrolment was launched in October 2012 the firm was focused on providing pensions solely for the construction industry. But Heath-Lay and chief operating officer Jamie Fiveash persuaded the board it should seize the opportunity and offer a master-trust on the open market.

Three years later nearly two million members are saving into The People’s Pension and the not-for-profit firm can boast household names including Pret a Manger, JD Sports and the Hilton hotel group as customers.

He says: “Originally we thought we’d just do auto-enrolment for the construction industry but two things changed that.

“Firstly, the big construction employers aren’t just about people in hard hats anymore: they are diverse and they have cleaners, recycling divisions and lots of other types of employee.

“You can’t go in there with a scheme just for construction workers, so we had to go beyond the traditional market.

“Secondly, the launch of Nest was a big threat. It was going around trying to get big employers and was not going to stop at the walls of the construction industry.”

As the biggest master-trust after Nest, the scheme has been thrust to the centre of a huge period of change for the industry. Lobbying with the likes of the Treasury and the Department for Work and Pensions is a world away from Heath-Lay’s first role at the provider.

He joined straight out of school in 1985 after his mother, who was working at a Jobcentre, found a job for him in B&CE’s mailroom. From there he gradually worked his way up, and was made chief executive in 2012.

While the firm’s growth has exceeded expectations, the tough economics of providing auto enrolment to millions of tiny pots forced the scheme to add an employer charge from 2016.

Employers will make a one-off payment of £500 plus VAT when they sign up, which the provider says will help pay for the extra support small employers need to comply with auto-enrolment. If working through an adviser the charge drops to £300 plus VAT.

“Just because we’re not for profit doesn’t mean we’re for loss,” says Heath-Lay.

“We need to make sure the way we handle this part of the market is proportionate for smaller employers and doesn’t detract from our existing 1.7m members already in the scheme.

“We don’t believe in front-loading charges on members to pay for that assistance. There comes a tipping point in the auto-enrolment cycle and we know what smaller employers need.

“Our member charge is one of the lowest on the market and if we are to continue serving this market we want to make sure we have an appropriate charge basis so we can sustain the service we’re really proud of.”

Members currently pay a 0.5 per cent annual management charge but Heath-Lay plans to lower fees further once the scheme achieves sufficient scale.

He says: “It’s difficult to put a number on it but I don’t think it will be too long before we think about reviewing long-term pricing. We’ve had a very successful early part of the market and we know how to make scale work.

“There are challenges but hopefully we’ll be able to lower charges within the next 10 years, probably less. But it depends how many more policy changes the Government will throw at us and how many more people we’ll have to bring in to deal with those.”

As well as The People’s Pension, B&CE operates one of the largest stakeholder schemes in the UK. When the freedoms hit, the provider experienced a 60 per cent increase in requests from members, many of whom had very small pots, to take their money out.

The provider led calls for regulatory risk warnings to be removed for pots under £10,000, arguing that the administrative burden on providers outweighed the benefit. The FCA has since confirmed the warning will no longer be a requirement; however, Heath-Lay says the industry is still learning to deal with the implications of the reforms.

He says: “It was a real challenge when the freedoms came in but it just wasn’t possible to introduce the whole set of freedoms. We tried to target the 95 per cent of policyholders to get the stuff in they needed. We couldn’t bring in the flexibility the larger pots needed, but that’s something we are trying to deal with.”

Members can use new withdrawal option uncrystallised funds pension lump sums to take parcels of cash from their pots, but cannot yet enter flexi-access drawdown.

But leaving members to fend for themselves on the open market does not sit well with Heath-Lay.

He says: “Most of our members at the moment do not have pots that would really warrant a sophisticated product, so we’re generally having to pass them to the open market. But we will have to look at whether that’s acceptable and whether there are other options out there.

“In the long term we should be trying to ensure we have our own or as good a tie-up as we can have so we have confidence where the membership are going and they won’t be ripped off. We don’t like the open market bit, just saying ‘we’re sorry we can’t help you’.

“We’re having to play catch-up.”

CV

2012-present: Chief executive officer, B&CE

2011-2012: Director of finance and strategic delivery, B&CE

2010-2011: Director of finance and customer development, B&CE

2008-2010: Director of finance and decision support, B&CE

2007-2008: Head of finance, B&CE

1985-2007: Various other roles at B&CE

Five questions

What’s the best advice you’ve received?

Always listen. The best ideas often come from diverse opinions and you don’t have all the answers yourself.

What has had the most significant impact on financial advice in the past year?

The freedom and choice agenda. It has really underlined the need for pension savers to have access to trusted guidance and advice in order to make the right choice for them.

What keeps you awake at night?

My eight-year-old son, wandering round the house in the middle of the night.

If I was in charge of the FCA (or TPR) for a day I would …

I would take The Pensions Regulator job in a heartbeat, then I’d knock on the pensions minister’s door to demand that the mastertrust assurance framework be made compulsory to protect savers from schemes that haven’t been independently assessed.

Any advice for new advisers?

There’s a huge demand for adviser support on auto-enrolment. It’s definitely an opportunity.

Thursday, 3 December 2015

Supermarkets: when too much space is a bad thing

It has become popular to think that the large superstores which are the hallmark of British supermarkets have become largely obsolete.

Click here to read the full article

Wednesday, 2 December 2015

FCA probes advice consolidators

FCA logo glass 620x430

The FCA has written to financial advice consolidators requesting information on suitability processes when acquiring new firms, Money Marketing can reveal.

The regulator is understood to have asked firms to provide details of their business plans for the next year, as well as details of how they treat customers gained through consolidation.

In particular, the FCA is seeking reassurance that consolidators are carrying out adequate suitability checks before shifting newly acquired clients onto their own panel of providers.

The regulator is also understood to have asked whether firms are automatically inserting new books of clients into their own investment proposition.

It is not yet clear how many firms have been contacted as part of the exercise.

An FCA spokesman says: “As part of the FCA’s supervisory model, we will from time-to-time ask firms to give us more information on how they operate. We do this to get a better understanding of the firms we regulate, how the market is working and to see how consumers are being served.”

The process is not part of a thematic review, but is an initial attempt to gather information from what the regulator deems to be “an area of interest”. It is the first time such an exercise has been carried out among advice consolidators.

Tuesday, 1 December 2015

Osborne: EU transaction tax ‘may not see the light of day’

2014-Budget-George-Osborne-Walking-700.jpg

Chancellor George Osborne has cast doubt on whether EU plans to implement a financial transaction tax will go ahead.

Speaking at the Treasury committee today, Osborne was quizzed by Conservative MP Jacob Rees-Mogg on whether the Government’s plans for a renegotiated relationship with Europe would see the UK required to collect tax on financial transactions taking place through London.

Currently, the UK will not join the plans for a FTT, but Rees-Mogg argued the attractiveness of London as an international financial centre could still be hit by a requirement to collect tax on behalf of members who are participating.

However, Osborne said: “To be honest, there’s not actually much of a proposal on the table at the moment. Although I’ve sat through interminable meetings about whether they are going to introduce one, it doesn’t seem to be seeing the light of day.

“Maybe good sense is prevailing on the councils of Europe.”

In September, EU economics commissioner Pierre Moscovici described a deal on the FTT as “within reach”.

Originally planned for implementation in 2014, finance ministers from Germany, France, Italy, Austria, Belgium, Estonia, Greece, Portugal, Slovakia, Slovenia and Spain now hope to have a transaction tax in place by 2017.

Monday, 30 November 2015

Jupiter CFO to step down

Boardroom-Business-Finance-Corporate-Meeting-Hire-700x450.jpg

Philip Johnson is stepping down from his role as chief financial officer at Jupiter Asset Management.

The move was due to “a narrowing of the role” amid “broader changes” to Jupiter’s executive committee, the firm said today.

Johnson will remain in his post until May 2016 to help with the transition of his successor.

Shares in Jupiter were down 0.5 per cent at 470p on Monday, according to the London Stock Exchange.

The chief financial officer, who was at Jupiter when the asset manager floated on the London Stock Exchange in June 2010, said it was a “privilege to play a role in the company’s transition from a private firm to a FTSE 250 constituent”.

He said: “I am looking forward to my next challenge, but can look back with pride on what has been achieved at Jupiter. The business is in an excellent position and I wish it every success going forward.”

Johnson worked at Prudential’s group head office before transferring to M&G in 2000 where he spent eight years, with the last five as group finance director.

He then joined asset manager Marshall Wace as finance director in 2008 before starting with Jupiter in 2009.

Jupiter has seen a number of senior people moves this year, including former chief investment officer John-Chatfeild Roberts stepping down from his role as well as various promotions to the executive committee.

Chief executive Maarten Slendebroek said: “This structure will ensure the business continues to be best positioned for its future development.”

Friday, 27 November 2015

Profile: Fidelity’s Dale Nicholls on the fear behind valuations

Moving to Japan straight after university to explore the technology boom was a natural call for Fidelity’s Dale Nicholls.

The manager of the £790m China Special Situations investment trust has been focused on the Asia Pacific region for more than 20 years. Originally attracted by the strength of Japanese companies, he left his native Australia to set up home there in the late-1990s.

“Part of the reason I moved to Japan was a natural interest in business and that was a time when Japanese companies were doing very well globally. I wanted to go and experience that.”

But the country started to feel small for Nicholls after a few years and his interests soon spread to the rest of the continent. He says: “I was working on a number of different sectors and one was technology. If you are a technology analyst in Japan you have got to be well aware of what is happening in the rest of Asia because it is where the competition and the customers are.”

Nicholls, who is a fluent Japanese speaker and highly proficient in Chinese, started with Fidelity Worldwide Investments in its Tokyo’s office in 1996.

“I worked through a number of different sectors and started to manage some local investment trusts but it was really in 2003, when I took over the Pacific fund, that it became a full-time fund management job: my first core mandate.”

After just a year managing the fund, the similarity of Nicholls’ investment style with Fidelity’s China-focused team brought him closer to the China Special Situations trust. He took over from veteran fund manager Anthony Bolton in 2014, while retaining management of the Pacific fund too.

He says: “China was always a major focus for me with the Pacific fund and a big source of ideas and contributors to performance. Over that period, being focused on that, anything style-wise tended to overlap. I suspect that having similar investment ideas was a factor behind the board’s decision for me to take over.”

Since Nicholls took charge, shares in the trust are up more than 30 per cent and nearly doubling the return of its benchmark, the MSCI China index. He is supported across both the vehicles he manages by 50 analysts, with over half of them purely focused on Chinese stocks.

Although times are currently hard for managers focused on emerging markets, Nicholls says the key challenges in fund management remain the same regardless of market conditions.

He says: “The challenge is always getting the best stocks in the portfolio. That is the constant process. Obviously we have been in a period of great volatility, particularly in the last six months, and you have to deal with that. However, that has actually provided some pretty good opportunities as well, which has been good, given the flexibility I have with the trust.”

For Nicholls, the real opportunity in China is consumption and new developments on increasing internet usage in the retail space, where he believes the country is ahead of the US.

“So much of the consumption story is going to happen naturally and that goes across goods and services. It is just a natural development of the middle class.

”The trend of things moving online is happening globally but you can argue it is happening a lot faster in China. If you look at ecommerce penetration, it has already gone beyond that in the US.”

Nicholls cites giant online retailer Alibaba as the biggest player but also holds fast-growing names such as Jingdong Mall and BysoftChina.

Another area of interest for the manager is healthcare. He says: “The healthcare sector needs to catch up in terms of social-enabling companies and the health insurance industry. These are themes that are going to increase.”

Nicholls is disappointed by the Chinese government’s intervention in stockmarket activity over the past few months. He says government policies and companies’ corporate governance will continue to play a critical role as the world’s second largest economy gradually attempts to open up its market.

“You have got to accept the Chinese government plays a big role in the economy, so you have got to be well aware of policies and how those are changing,” he says.

“Corporate governance generally is also challenging in China, alongside other emerging markets. Many companies have not been around for that long, so that is a risk you need to be factoring in when you look at any individual company because you want that extra level of valuation support.”

The Chinese government introduced a number of measures aimed at stabilising the A-share market earlier this year, starting with the People’s Bank of China cutting interest rates and the reserve requirement ratio.

This was followed by the suspension of IPOs, the injection of liquidity into the China Securities Finance Corporation to help support the market and the creation of a “stabilisation fund” by onshore brokers, which collected ¥120bn (£12bn). The government has also banned major shareholders from selling their own shares.

Just last month, the PBC cut base rates for the sixth time in 12 months by another quarter point to 4.35 per cent in an attempt to boost the economy.

Nicholls says: “The government intervention over the last few months has been disappointing. The mid-term story for China is about opening up and liberalising the markets, yet we have seen a pretty heavy-handed reaction, which has been a backward step.”

However, following the recent falls in the market, Nicholls says things look “pretty compelling” from a valuation perspective.

He says: “There is a great deal of fear out there that is being reflected in valuations, which are close to their historical low. As a stockpicker, that sort of environment, with a lot of value and a lot of negative sentiment, is generally a good environment. I am more positive now than I was six months ago.”

CV

2014-present: Fund manager, Fidelity China Special Situations PLC

2003-present: Fund manager, Fidelity Funds Pacific fund

2003-present: Portfolio manager, regional and China mandates at Fidelity

1999-2003: Portfolio manager, Japanese mandates at Fidelity

1996-2003: Research analyst, Japan, at Fidelity

1994-1996: Analyst at Bankers Trust Asia Securities

Thursday, 26 November 2015

Providers call for tighter SSAS regulation

Piggy-Bank-Savings-UK-700x450.jpg

Pension providers are calling for tighter regulation of small self-administered schemes as they report growing levels of non-standard investments entering the market.

Currently, SSAS are regulated by The Pensions Regulator as occupational schemes while Sipps fall under the FCA’s remit.

Mattioli Woods operations director Mark Smith says riskier non-standard assets have been moving away from increasingly tightly controlled Sipps.

He says: “We’ve been speaking to the FCA about this. Both Sipps and SSAS are regulated but the way they are regulated is hugely different.

“The FCA is very prescriptive around areas like non-standard assets and is very clear about what it wants to see from Sipp providers.

“But there’s nothing like that for SSAS. We’re seeing people move to SSAS for non-standard investments, so there needs to be a better way to regulate this part of the market.”

Dentons director of technical services Martin Tilley says: “SSAS are still the weak link where investment misappropriation might happen.

“The market needs a bit of help from FCA-regulated entities such as banks, which should only deal with SSAS with a fit and proper administrator.”

Govt to allow debt-based crowdfunding in Isas

Money-Cash-Coins-GBP-Pounds-UK-700x450.jpg

Crowdfunded debt securities will be allowed within Isas from next year, the Government has confirmed.

In the March Budget the Government announced it would consult on whether to extend eligible Isa investments to include investment-based crowdfunding.

In its response to the consultation published today, the Government says Isas will be extended to crowdfunded debt securities from autumn 2016.

However, equity crowdfunding will not be included at this stage. The Government says it will work with the industry to further explore the case for this.

The Government says some respondents to the consultation argued equity crowdfunding is higher risk as the market caters for riskier businesses and is less likely to provide regular returns.

Hargreaves Lansdown chartered financial planner Danny Cox says the move is welcome as equity crowdfunding has less investor protection than debt crowdfunding.

He says: “Both equity and debt-based crowdfunding could potentially be a large market benefiting investors and UK plc. Crowdfunding projects range hugely to the extent that only those which offer genuine investment as either debt or equity should be described as such.”

Tuesday, 24 November 2015

In search of diversified income: UK property

In this video, the fund managers discuss the fund and where they are finding value, the UK property market and outlook and opportunities for long-term income potential.

Click here to watch the video

Monday, 23 November 2015

Aberdeen Asset Management’s Chou Chong quits after 21 years

Board-Room-Meeting-Room-Business-700

Aberdeen Asset Management’s investment director of Asian equities Chou Chong is leaving the firm at the end of the year.

Chong has decided to leave the asset management industry, says Aberdeen in a statement.

“While we are saddened by Chou’s departure after a long and successful career with Aberdeen, we are confident in our highly-skilled investment team, which remains an industry leader in Asian equity investment experience and is led by Flavia Cheong, head of Asian equities,” says a statement from the asset manager.

In 2008 Chong stepped down from his role as head of pan-European equities at Aberdeen after more than five years with the company, as he decided to return to Singapore for personal reasons. He remained with the company in its Singapore office.

Chong joined Aberdeen in 1994 and has also worked in the company’s Sydney office.

Saturday, 21 November 2015

Buy land, they’re not making it anymore

Investing in land can provide a good source of income as it doesn’t suffer from depreciation, and returns actually have a low correlation with the returns from property and financial markets.

Read the article

Friday, 20 November 2015

IA in talks with Treasury over tax break for bonds

HM-Treasury-Front-700x450.jpg

The Investment Association is in talks with the Treasury over extending the tax exemption on savings interest to bonds.

In the March Budget, Chancellor George Osborne announced that no tax will be deducted on the first £1,000 of interest earned on savings from April 2016. Higher rate taxpayers will be given a £500 tax-free allowance.

IA head of tax Jorge Morley-Smith says the trade body is in early stage discussions with the Treasury over whether the policy could be extended to income earned from bonds.

Income earned within an investment bond is currently taxed at 20 per cent.

Morley-Smith says: “We have had preliminary discussions with the Treasury about the tax regime for funds.

“We would like to see the abolition of tax on income from savings extended to the fund environment, so that where a bond fund pays interest it is treated the same way. Not only would that be good news for UK savers, it would also encourage investment from overseas investors.”

AJ Bell investment director Russ Mould adds: “Given the Government has a substantial deficit, I can understand why the Treasury would be happy to encourage investors to buy bonds through additional tax breaks.”

In July, the Government consulted on how the £1,000 tax free allowance will be applied to various types of savings income.

It says the allowance will apply to interest, income from certain purchased life annuities, profits from deeply discounted securities, profits under the accrued income scheme and gains from certain life insurance contracts.

The Government’s response to the consultation is due by the end of the year, with any necessary legislation to be included in the Finance Bill 2016.

Thursday, 19 November 2015

Quarterly Perspective: UK equities – worth a closer look?

Overview

The UK equity market got off to a strong start in 2015, growing by over 8 per cent by mid-April, driven by an improving outlook for global and European growth. However, a renewed fall in commodity prices has hurt the share prices of the basic materials and energy companies that make up 16 per cent of the FTSE All Share. Thanks to the summer sell-off, both the FTSE 100 and the FTSE All Share are now in the red year to date, providing an attractive entry point for investors who missed the earlier market rally.

The UK economy continues to pick up pace

The UK has recently been one of the best-performing developed market economies, with an average growth rate of 1.9 per cent year on year over the last 12 months – well above the G7 average of 1.1 per cent year on year. It was the fastest-growing economy in that group in 2014, when national output expanded by 2.6 per cent.

Such strong growth is beginning to pay off for UK workers, with wages now starting to rise after years of falling living standards. As shown in the bottom right-hand chart, UK wages have grown in real terms for the last nine months, the longest period of sustained real wage growth since the global financial crisis began in 2007.

Download the full report

Wednesday, 18 November 2015

Tenet business development boss to join SimplyBiz

2094941_Business-Handshake-Finance-Deal-700

SimplyBiz has hired Tenet head of business development Tom Hegarty as managing director of its New Model Business Academy.

Hegarty joins the training and development division after four years at Tenet. He previously held roles at MetLife and Friends Provident.

The not-for-profit NMBA has over 16,000 members and provides support to advisers developing skills in new business areas, as well as helping advisers work towards professional qualifications.

Hegarty says: “I intend to build on the solid foundations of the NMBA and improve and enhance the range of services it offers to advisers.”

He will be joined at SimplyBiz by Cath Faulds, who comes to the business from the Institute of Financial Planning and will serve as the firm’s head of strategic relationships.

Tuesday, 17 November 2015

‘Banned’ self-cert loans set for return

Home-House-Paper-Chain-700x450.jpg

A new lender is looking to bring back self-certified mortgages at the start of next year.

The FCA banned so-called ‘liar loans’ in the Mortgage Market Review.

However, Graeme Wingate, the founder of unsecured lender Quick Loans, is looking to bypass UK regulation by setting up in an Eastern European country, the identity of which he would not disclose.

While the new lender, selfcert.co.uk, will not have to abide by UK regulation, it will have to adhere to the incoming Mortgage Credit Directive, although it is less strict on rules around creditworthiness and income verification.

The directive merely states that the borrower’s income must be “appropriately verified, including through reference to independently verifiable documentation when necessary”, whereas the MMR explicitly states “a firm must not accept self-certification of income”.

Wingate says: “We’re setting up a new company [in Eastern Europe]. The regulator out there has been very friendly and helpful to us, walking us through the process of getting a licence. It is quite a straightforward process.”

Wingate plans to passport into the UK under the Electronic Commerce Directive.

An FCA spokeswoman says: “A firm located in an EEA Member State can provide a lending service under the Electronic Commerce Directive to UK consumers, but the service has to be provided solely at a distance and online.

“This service, however, would not be regulated by the FCA and if something went wrong, the FCA is not generally able to intervene. Additionally there would be no recourse to the compulsory jurisdiction of the UK’s Financial Ombudsman Service.”

Wingate says he expects to obtain a lending licence within the next week.

Self-cert loans were initially meant to be for self-employed borrowers or those with irregular income but in 2007 they accounted for over 50 per cent of new lending, according to the FCA.

Trinity Financial product and communications manager Aaron Strutt says: “Self-cert mortgages are a real blast from the past and many brokers will be surprised that there is even a chance they will be available again.

“It is hard to see how self-cert can play a part in a modern financial market, even if a lender can get around the rules by operating online and via another country.”

The lender expects to launch in mid-January.

The announcement on Quick Loans’ website:

We are pleased to announce that as of January 2016 we will be at the forefront of bringing back self-cert mortgages to the UK through our new sister site.

Self-cert mortgages are important vehicles for those who are self-employed and want to get on the property ladder. Without them, those who went in to self-employment have often found themselves unable to get a mortgage – we want to reverse that.

We believe that the products were unfairly blamed for the banking crisis – in reality they actually had little or nothing to do with the crash, on this side of the Atlantic anyway. Blatant fraud (often by brokers) and mortgage backed security swaps in which banks lost their common sense were the real reason that the banks crashed. We intend to avoid both of those major factors.

The majority of people on self-cert mortgages did not default and are up to date on their repayments. We are confident that our own assessment process will reduce fraud as much as humanly possible and well within manageable levels.

Quick Loans Ltd has recently purchased the domain name SelfCert.co.uk – it is from this site we and our partners will slowly look towards proving the concept and viability of bringing back these products to the market on a larger scale. We expect interest to be high from day one, so much so that we don’t expect to meet demand on our own.

We will be in a position to release more details on this in the coming weeks with a launch date of mid-January 2016.

How to combine retirement income strategies

Aegon’s consumer research shows that 70 per cent of investors want some form of guaranteed income in retirement, and most also want to maximise the growth potential of their savings.

The good news is they don't have to choose. Clients can use Secure Retirement Income to create a guaranteed income that covers essential costs. Then they can invest remaining savings in flexi-access drawdown to maximise their growth potential.

Aegon currently has the only platform in the UK that lets clients combine a secure income with the growth potential of flex-access drawdown, all in the same place.

So why use one when you could have the best of both?

This simple explanation shows how investment priorities can change depending on spending needs.

To find out more visit www.aegon.co.uk/flexibility

Friday, 13 November 2015

Ian McKenna: What must platforms do to survive?

McKenna-Ian-MM-2014-700.jpg

So platforms are dead. Or are they? After 15 years of an almost unanimous view that platforms are the future, their obituaries have appeared overnight. The death of platforms is perhaps an exaggeration but they are in need of serious surgery. Most are in the intensive care unit and, indeed, some will not survive. It is time to explore what they need to do to have a valid role in the future.

Selecting the platforms that are best for their business and their clients is going to be one of the most important factors in determining an adviser’s growth and profitability. This makes the FCA’s recently restarted review of their due diligence even more timely.

Ultimately, platforms provide a technology function and this will be even more the case in the future. The best platform going forward may be one you do not even realise is there. Standalone platforms, where an adviser has to manually enter data and transactions with all the duplication of effort and risk of error that brings, will not be viable commercial partners going forward.

Adviser firms want to reduce the costs incurred in providing and executing advice and so platforms that can seamlessly move data between the key systems they use and execute the related transactions will become increasingly attractive.

There has been a significant shift in the epicentre of the adviser technology market. The practice management software through which an adviser manages their firm is no longer the most important system in the business. In a digital world, the system that matters most is the client portal. This technology is increasingly the public face of the adviser firm, available 24/7 when the adviser cannot be, not replacing them but complementing the relationship, making it a day-to-day part of clients’ lives.

Platforms have fallen to third, even fourth, place in the hierarchy. They were always subordinated to practice management systems in any business that wished to optimise efficiency – and consequently the cost of advice – through the effective use of technology. They have grown through making it easier to manage multiple assets via a single infrastructure. Now they need to make this far easier to achieve in order to continue to deliver real value and enable the adviser to do far less to achieve more.

Every action within the software the adviser is using to interact with clients (which is increasingly the client portal, not just the practice management system) must be automatically transferred to the platform with any necessary transactions sanctioned from within the advisers’ chosen system. Anything less than this will create unacceptable additional costs.

To reduce regulatory risk, having a consistent solution for risk profiling and portfolio construction is also important. It is only fair to recognise a significant number of smaller firms are not investing in sourcing independent tools, relying instead on platforms to deliver such capability. But this brings risks.

Unless they are going down the single platform route, or all selected platforms use the same tools, this means clients will have risk attitudes, capacity and even investment strategy assessed in different ways. Firms that go down this route may still see the traditional platform approach as appealing, although they will increasingly find this a false economy.

In practice, seamless integration can be a very expensive activity. It requires deep pockets and is likely to tip the platform playing field in favour of those who have the ability to not just build but also maintain extensive interaction. Advisers should not be misled into thinking this is easy to do. There is a huge variation between what different platforms actually deliver in this area.

However, for those looking to decide which adviser software to use, understanding which providers your preferred platforms have detailed integrations with will be a significant factor to consider.

The closer the integration between the different systems in an adviser business the greater the scope for reducing cost, improving efficiency and enhancing service. Three compelling reasons for making such factors a key part of any platform or software selection process.

Ian McKenna is director of Finance & Technology Research Centre

Thursday, 12 November 2015

Money Marketing sweeps the board at personal finance media awards

Santander-website of the year

Money Marketing scooped four awards at this year’s Santander Media Awards, including financial trade title of the year and trade website of the year.

Money Marketing pensions reporter Sam Brodbeck took the title for trade journalist of the year, while deputy head of news Tessa Norman won the judge’s award for trade article of the year, for revealing the raft of pension freedom cases to hit the Financial Ombudsman Service.

This is the second year in a row Tessa has won the trade article of the year award.

Santander-Sam Brodbeck

The awards were held at The Banking Hall in London and were hosted by BBC breakfast business presenter Steph McGovern.

It is the fourth year in a row that Money Marketing has collected the award for best trade website. Money Marketing also won the best trade title award last year.

Earlier this year Sam Brodbeck won the pensions journalist of the year award at the Headlinemoney awards. Tessa Norman also won the Protection Review protection journalist of the year award and the James Hay Media Award for her coverage of the platform market.

You can follow Money Marketing on Twitter by clicking here, sign up for our regular news and analysis email alerts here and subscribe to our weekly magazine here.

You can also join us at our upcoming Brave New World retirement conferences, including a keynote session with the FCA and the FSCS here

Wednesday, 11 November 2015

European Central Bank: all options on the table

By Paul Diggle, Economist, Aberdeen

European Central Bank (ECB) President Mario Draghi opened the door to further easing of monetary policy when, following the bank’s 22 October meeting, he announced that “the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting”. Two important questions for the next few months are: what form will further ECB easing take and what are the implications for the US Federal Reserve (Fed)?

Click here to read full article

Tuesday, 10 November 2015

Danby Bloch: Handle alternative investments with care

Bloch-Danby-2014-MM-700.jpg

Most advisers avoid alternative investments due to problems that have been caused by them in the past. However, eschewing their use altogether could deprive clients of a valuable source of diversification alongside other benefits. Indeed, the case for at least considering alternatives is compelling, but it is essential to be discriminating.

Investments that qualify for inheritance tax business property relief can be especially useful. They allow the amount invested to become IHT free after just two years’ ownership and without leaving the client’s possession.

These investments are great for short(ish)-term IHT planning – for example, for someone who might be too ill or too old to expect to live for seven years.

There is a range of BPR investments, including Aim portfolios and generalist EISs, which have high investment risk but low likelihood that the tax position will change. These are probably more suitable for clients who might turn out to be relatively long-term holders with the ability to cope with fluctuating investment values.

Then there are the BPR solutions with very low volatility but negligible or nil return on investments. It is difficult to believe these are what the Government had in mind when it was designing this particular tax relief, and if the Treasury and HMRC knew how to stop them without messing up the more kosher business arrangements, they probably would.

There is a constant tussle between successive governments and the tax efficient investment industry. The government gives these tax incentives to investors to take risk and put their money into small businesses, while the industry mostly aims to minimise these risks as much as possible. With this in mind, there is always the danger the government will restrict BPR.

The best way to counter this admittedly fairly distant threat is to make sure each client understands the possibility of changes to the rules of the game.

It is also probably best to share the recommendations with the rest of the family at the time of the investment, so that everyone is clear about the objectives.

Another potential threat is that something goes wrong with the investment or the structure technically that disqualifies it from benefiting from the tax relief. This is a pretty rare phenomenon but it underlines the importance of using providers you trust to get it right.

VCT tax relief

Venture capital trusts can also look attractive, especially in the context of retirement planning. There is an upfront tax relief boost to the initial investment of 30 per cent, which helps compensate for the extra risks involved in investing in smaller companies. In the longer term the main attraction for many clients in retirement may lie in the freedom from tax on the dividends.

When planning a portfolio in retirement, stability of income flows is probably a higher priority than low volatility of capital values. So it is worth finding out about VCTs’ dividend policy and the likelihood of them being sustainable.

Past performance of certain VCTs has been reassuring. Tax Efficient Review’s Martin Churchill has been running and monitoring a portfolio of successive VCT investments since 2004. From a net cost of £82,500 after tax relief the portfolio has turned a profit overall of over £101,000 that includes pretty stable tax free dividends of just over £74,000 in aggregate, with annual internal rates of return ranging from 2.03 per cent to 18.3 per cent.

Of course, past performance is an unreliable guide to the future, as we all know. And it is not just that the investment environment over the past decade has been in a state of flux, encompassing the biggest market slump followed by a major revival. The rules restricting what VCT managers can invest in change pretty much every year as well.

This year, the rule changes have been especially restrictive and, according to Churchill, seem likely to cut back the flow of good generalist VCT investment opportunities, according to Churchill, particularly following the ban on management buy-out based investments that will take effect this month.

Do not get into this area without doing serious homework and preparation. Alternative investments have their attractions – some of them unique – but there are dangers for the unwary in the form of scams, mistakes, high costs and simple changes in taste.

Danby Bloch is chairman of Helm Godfrey

Monday, 9 November 2015

Five key retirement issues

M&G's Technical Development Director Julian Hince & Investment Specialist Maria Municchi look at some of the key issues to be overcome when planning for retirement.

Click here to watch video

Osborne secures deals on 30% cuts as DWP digs in

George-Osborne-BW-700.jpg

Chancellor George Osborne is set to announce four government departments have agreed to cut their spending by an average of 30 per cent over the next four years.

The BBC reports the Treasury, transport, local government and environment departments have agreed provisional deals on cutting day-to-day spending ahead of the joint spending review and Autumn Statement on 25 November

Osborne has asked most Government departments to come up with savings of between 25 per cent and 40 per cent by the end of this parliament, with health and overseas aid budgets protected.

The Chancellor is expected to say later: “While debt is high, our economic security is in danger.

“No one knows what the next economic crisis to hit our world will be, or when it will come. But we know we haven’t abolished boom and bust.”

Osborne is seeking £12bn in welfare savings from the Department for Work and Pensions, but an agreement is yet to be reached.

Following the defeat in the House of Lords over working tax credits, he is looking for new ways to save £4bn.

But Work and Pensions secretary Iain Duncan Smith is said to be strongly resisting attempts to make universal credit less generous.

Friday, 6 November 2015

FCA starts collecting evidence on advice review

FCA interior 620x430

The FCA is to approach around 400 advice firms and providers as part of an exercise to gather data for the Financial Advice Market Review.

The process is expected to begin from Monday, and will involve groups including directly authorised advisers and networks, as well as banks and life insurers.

Questions will focus on the provision of advice for clients or customers seeking advice on retirement income, pensions or retail investments.

An FCA spokeswoman says the regulator will ask for information on the areas on which firms provide advice and firms’ relevant advice channels, charging structures, customer numbers and investable assets.

It will be looking for details of any issues around defined benefit to defined contribution transfers, firms’ future plans, use of technology, barriers to innovation, entering the advice market and expanding advice services, and liabilities and costs.

The exercise will be in addition to responses sent to the regulator as part of the broader FCA’s call for input on the FAMR, which is looking at the accessibility and affordability of advice.

Among other measures, it will include a consultation on a 15-year long-stop on liabilities for financial advisers.

The FAMR review is being jointly led by the FCA and the Treasury, and is expected to conclude ahead of next year’s Budget, although the regulator’s practitioner panel has warned against its “ambitious” timetable.

An FCA spokeswoman says: “This exercise will use more granular questions than were in the call for input to provide quantitative information. Firms involved can still participate in the call for input as well.”

Thursday, 5 November 2015

Pensions: Reading the tea leaves…

Last week it was widely reported that The Chancellor, George Osborne, has signalled that there will be no announcements from him in response to the “Strengthening the Incentive to Save” consultation until the 2016 Spring Budget statement.

This continued uncertainty has left commentators sifting through the tea-leaves in an effort to reach a consensus of opinion as to what the eventual outcome for UK pensions will be. But for me there is at least one key pointer within the following exchange recorded in Hansard this week:

“Richard Graham (Gloucester) (Con): The coalition Government freed pensioners from mandatory annuities and encouraged saving through ISAs and auto-enrolment. However, tax relief on contributions to pensions is expensive and favours higher-rate taxpayers much more than others. Does my right hon. Friend agree that that is an area in which sensible reform could be considered, in order to help to balance the budget without disincentivising saving?

Mr Osborne: My hon. Friend is right to say that we have taken significant steps to encourage saving, not least by giving pensioners control over their pension pots in retirement and by trusting those who have saved all their lives with the money that they have earned and put aside. He is an expert in these matters, and he will know that we are open to consultation on the pensions taxation system at the moment. It is a completely open consultation and a genuine Green Paper, and we are receiving a lot of interesting suggestions on potential reform. We will respond to that consultation fully in the Budget.”

The key clue is not so much in The Chancellor’s response – more the source of the question.

Followers of our updates will note that this point was raised by a fellow Conservative MP, and it is therefore more than likely that the question was “on message” from the governments point of view. And given that Higher-Rate tax relief was highlighted in this question it would seem that this one component of the system is set for major reform. There may of course be greater change afoot as well – but employers would be well advised to at least notify their higher-earners of the possibility of a swift change to their pension’s tax relief position come 2016.

For more information on the consultation and likely outcomes, please speak to your usual Jelf consultant.

For the full original article and other similar posts please visit the Jelf Group blog

Wednesday, 4 November 2015

Pressure builds on Europe to delay Mifid II

EU-Euro-Europe-Eurozone-700x450.jpg

European policymakers could push back the implementation deadline for Mifid II as concerns grow that firms will run out of time to comply.

The FCA is due to publish its Mifid II policy statement in June 2016, before the legislation comes into force in January 2017.

There are unresolved issues with Mifid II, including a requirement to disclose all charges relating to a product to investors upfront, a different independence definition and tougher inducement rules.

However, the FCA cannot start the consultation process until the European Commission publishes final technical standards.

Draft technical standards published by the European Securities and Markets Authority in September still have to be endorsed by the commission, a process that could take up to three months.

The commission has also yet to publish delegated acts – the detail underpinning the retail part of the legislation. These were due in July but are now not expected before the end of this month.

The FCA has said it will publish one consultation paper on markets issues in December, and another on conduct issues in March.

Cicero Brussels deputy head James Hughes says: “Everyone has been working towards the technical standards and delegated acts being finalised by the end of this year. That would give national regulators enough time to prepare their domestic consultations and the industry close to a year to get ready.

“However, it now looks pretty unlikely that we will have both completed by the end of this year.”

Wealth Management Association director of regulation Ian Cornwall says: “January 2017 would have been a tight deadline even if the delegated acts were published in July, but we have lost five months and it is almost impossible now. However, our advice to our members remains that they should plan for a January 2017 implementation date.”

MEPs are discussing whether the implementation could be delayed.

Hughes says: “We have spoken to a lot of MEPs and they have competing views on how easy it would be to introduce a delay. The FCA is certainly sympathetic to the fact the timetable is becoming increasingly condensed. If the deadline stays the same, the FCA could signal to firms that it will be lenient initially, provided firms can show they have made sufficient effort to comply.”

In a speech at the FCA’s Mifid II conference last month, FCA director of markets policy and international David Lawton said: “We are all too aware that the later it is we consult on, and finally publish, final rules, the less time it is for the industry to prepare and implement. Be assured, we are treading the line between getting things right and moving quickly, carefully.

“The ultimate deadline of January 2017 is universally recognised as challenging. For everyone. Regulators included.

“Even now that Esma has delivered the draft technical standards, it will be for the commission and co-legislators to make decisions about the European timetable, not for national competent authorities.”

Expert view: Mifid II shambles must be delayed

It is a racing certainty that the implementation date will be delayed. If you read David Lawton’s speech at the FCA’s Mifid II conference carefully, he is signalling as clearly as any official can that there is great uncertainty about the timetable.

Furthermore, in International Organization of Securities Commission circles they are talking about not just a 12-month delay but a delay of two or three years.

This is like Solvency II all over again, where the implementation date was eventually delayed by eight years. Frankly, it is a shambles. The European regulatory system is just too cumbersome.

It is very easy to draft the high-level stuff, but then you delegate to technical experts on how it will be implemented. And sometimes you discover that things don’t work in practice.

For example, the idea of having to disclose all product costs upfront is pretty stupid because for funds you only know the costs after the event. Regulators are straining so hard to achieve greater levels of consumer protection that sometimes it cannot be done.

To change the implementation date would require another piece of legislation, but we know it can be done because it has been done before. What the FCA was signalling at the conference was that we are out of time already.

The timetable was very tight 12 months ago; now we are staring down the barrel of a gun.

Richard Hobbs is an independent regulatory consultant