Baillie Gifford’s MacDougall replaced on Japan funds

Baillie Gifford Japanese Smaller Companies Fund and Shin Nippon investment trust manager John MacDougall has been replaced.

MacDougall will move to a global equities role within the company, after eight years running the two funds.

He will be replaced by Praveen Kumar, who is currently an investment manager in the Baillie Gifford Japanese equities team, as of 1 December.

The £239m Japanese Smaller Companies fund returned 67.4 per cent over three years compared to the sector average of 49.2 per cent.

The £160m Shin Nippon investment trust has returned 188.5 per cent over five years against the sector average of 55.7 per cent.

“Praveen Kumar will be supported by Baillie Gifford’s Japanese Equities team, which currently comprises five investment managers and three analysts with over seven decades of collective market experience,” says Sarah Whitley, head of Japanese equities.

Lost in the post: Employers challenge regulator over auto-enrol enforcement

Employers have questioned The Pensions Regulator’s enforcement action over auto-enrolment in 379 cases, new figures show.

In one example provided by TPR, an employer challenged a £400 fixed penalty because they said they had not received the notice as their post “was frequently delivered to the wrong address”.

However, the regulator rejected the appeal as it had a telephone recording where the employer confirmed it had received the notice.

The case was one of 379 reviews of statutory notices handed out by the regulator for breaches of auto-enrolment duties up to September 2015.

This is the first time details of the reviews has been made public.

Of these, 279 resulted in the notice being “revoked, substituted or varied”. This includes cases where a different breach has been uncovered and the regulator has decided to use a different power instead. TPR would not say how many reviews resulted in it dropping statutory notices entirely.

However, the regulator says: “Many of these appeals related to people who – due to a change in circumstance or because they were single person directors – did not employ anyone on their staging date. In these cases the statutory notice is usually revoked.”

In addition, six reviews were requested to be taken to tribunal. Of these two were resolved after notices were revoked, the tribunal sided with the regulator on two occasions, and two cases are ongoing.

The regulator’s latest quarterly compliance bulletin also shows it has now used its powers in 3,044 cases. This includes 582 £400 penalty notices and seven escalating fines, which range between £50 and £10,000 a day depending on the size of the employer.

TPR executive director of automatic enrolment Charles Counsell says: “Employers can avoid triggering a compliance notice by following the clear step-by-step information we provide on our website. This includes completing a declaration of compliance within five months of the date their duties went live.

“My message to employers is get your plans in place early, meet the deadline to complete a declaration to let us know how you have met your duties. Don’t ignore workplace pensions and risk a fine.”

Allianz Global Investors CEO steps down in reshuffle

Allianz Global Investors chief executive Elizabeth Corley is to step down from her role to take on a non-executive position as vice chair at the firm.

Current chief investment officer and co-head of the firm Andreas Utermann will split responsibility for Corley’s role as chief executive and co-head of Allianz GI with George McKay, Allianz GI’s acting head of Europe and current chief operating officer.

Utermann will continue to be responsible for the firm’s investment platform as global chief investment officer.

Meanwhile, McKay will become co-head, taking responsibility for global distribution, global solutions and corporate marketing, while retaining his operating officer responsibilities.

The new structure will be effective from March 2016, the firm says.

Jay Ralph, chairman of parent company Allianz Asset Management, says of Corley: “Her strong partnership with Andreas has set the tone of client-focused collaboration that is one of the firm’s hallmarks and is something that can be expected to continue into the future with George joining Andreas as co-head of the firm.”

In her new part-time role, Corley, who has been at the firm for 10 years, will continue to represent the firm externally.

Utermann says: “Elizabeth’s inspirational leadership, passion for investment and boundless positive energy have contributed immeasurably to the success and standing of Allianz GI today.

“Naturally, I am delighted that she will continue to act as an ambassador for the firm into the future. Equally, I look forward to cementing a similarly productive partnership with George, who has demonstrated his leadership and agility in many roles since joining the firm in 2006.”

Tony Wickenden: The fine line between tax avoidance and evasion

Government action against tax avoidance has made the headlines on numerous occasions over the past few years, with significant developments in litigation, legislation and early tax collection, via a combination of follower notices and accelerated payment notices.

Add to this the expansion of the disclosure of tax avoidance schemes, hallmarks to improve HM Revenue & Customs’ awareness of what is in the market as well as its ability to issue APNs, and you have a pretty joined-up strategy.

The so-called tax gap – effectively the difference between what HMRC should collect if the tax legislation were perfectly applied, as intended, and what is actually collected – is officially estimated to be in excess of £30bn, or almost 7 per cent of theoretical tax liabilities. While the UK tax gap apparently compares well to that found in other countries, the Government is, understandably, determined to reduce it further.

The Government (and the previous coalition) has cracked down on those determined to break or bend the rules with radical initiatives. As a result, it has changed the economics of tax avoidance by reducing the incentives for entering into avoidance schemes. It has also worked to ensure HMRC has the tools and powers it needs to address evasion and avoidance.

Many avoiders have been found by HMRC or have come forward to put their tax affairs in order. The key means to achieving this end has been the various disclosure schemes promoted – for example, Liechtenstein, Isle of Man, Channel Islands and Switzerland. Through these, many using offshore deposits and other strategies have sought to pay up or decided not to engage in further schemes.

They have offered immunity from criminal prosecution and reduced penalties. However, they are coming to an end shortly, with a less attractive “last chance saloon” option in the upcoming tax year.

All the action against aggressive avoidance has caused some confusion over what is acceptable and what is not. Tax evasion is and always has been illegal. This is when people or businesses deliberately do not declare and account for the taxes that they owe. It includes the hidden economy, where people conceal their presence or taxable sources of income.

On the other hand, tax avoidance, according to the Government, involves bending the rules to gain a tax advantage Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce this advantage. It involves operating within the letter, but not the spirit, of the law.

Tax planning, meanwhile, involves using tax reliefs for the purpose for which they were intended – for example, saving via an Isa or a pension scheme. However, tax reliefs can be used excessively or aggressively by others than those intended to benefit from them or in ways that clearly go beyond the intention of Parliament. Where this is the case, HMRC believes it is right to take action, as it is important the tax system is fair and perceived to be so.

Understanding clearly the difference between evasion, unacceptable avoidance and tax planning is incredibly important for financial planners, as is being able to clearly and simply articulate these differences. Of course, perhaps most important is being able to apply these definitions to any tax-reducing strategy, so as to be able to correctly categorise it and advise the client appropriately.

This kind of practical tax know-how will also be hugely useful in proving competence and trustworthiness to professional connections.

Tony Wickenden is joint managing director at Technical Connection

Platform focus: Tech investment could pay off for Ascentric

In this week’s platform focus, we turn our attention to Royal London’s Ascentric. Of the 23 platforms we track, it is the 11th-largest in the UK by assets under administration, with £9.6bn as at 30 June.

The platform’s AUA growth has been slightly behind the market average but this appears to be due to greater exposure to volatile markets. With higher than average case sizes, the platform has an increased diversity of investments and carries more exposure to volatile stocks.

AUA is up 19 per cent for the 12 months to the end of Q2 and we see this as a fairly good result, considering it has been focused on replat-forming for the past two years, limiting its capacity for proposition development. We see a rosier picture for net sales on the platform in Q2, with a 43 per cent increase from Q1.

Since managing director Jon Taylor’s move to Ascentric in January, Royal London has sold the client book of its D2C proposition Fundsdirect to Strawberry, signall-ing a clear intent to concentrate on providing services to the intermediary market. Its recent deal to provide a white labelled platform to Partnership will broaden its reach in the adviser market further.

Clearly, Taylor’s strategy and ambition is sound but it has yet to translate into a real turnaround in Ascentric’s adviser ratings and we have seen a shift away from advisers using its as their primary platform. In Q4 2014 (the first quarter we collected this data), one-third of advisers we surveyed using Ascentric classed it as their primary platform. This has shrunk to just 17 per cent in Q2 2015, while the share of secondary platform users jumped up from 18 per cent to 57 per cent over the same period. Advisers tell us the Ascentric website is clunky and slow. Indeed, its scores for web usability and usefulness of online tools are below industry average.

The platform does not offer risk profiling or asset allocation tools but tells us this is a deliberate strategy based on feedback from advisers. However, it recognises its technology is in need of an overhaul and has invested heavily. It assures us we will see in upgrade in Q1 next year.

On the other hand, advisers consistently tell us they are very happy with the range of funds and tax wrappers available on the platform. Investment choice really matters: 74 per cent of those we surveyed in Q2 placed it in their five musts of the perfect platform. Of those that provide us with data on tax wrappers, Ascentric is the only platform that offers Qrops, with SSAS and Section 32 wrappers also available. Cannily, it has also responded to the growing demand from advisers to outsource to on-platform discretionary fund managers, offering access to 37 DFMs. Of the 48 per cent of total assets on platform in model portfolios in Q2, 46 per cent of these were in DFM models.

In a series of interviews we recently conducted with DFMs, Ascentric was named as one of the favoured platforms to work with, offering the back-office support needed for model portfolios and bespoke fund picking. We see the movement of discretionary assets on-platform as a key growth area for the adviser platform market in the next three years. With the launch of a new front end and the transitioning of its back-office platform technology to Bravura’s Sonata, 2016 looks set to be a signifi-cant year for the Ascentric business. These developments may just provide the shot in the arm it needs.

Miranda Seath is senior researcher at Platforum

Which? accused of ‘misleading’ consumers over calls to publish advice charges online

Which? has been accused of “misleading” consumers with research that shows two-thirds of advisers provide no charges information online.

Research published by the consumer campaign group shows that of 500 advice firms’ websites, 70 per cent do not publish their charges online.

It says of the 115 sites which claim to show fees, 76 per cent do not give enough detail to give “a real indication” of what a customer would pay.

Which? claims just 2 per cent of the sites it looked at “publish genuinely useful information for clients including a clear breakdown of charges”.

The group says only 33 sites allowed its researchers to download a key facts document.

Of 206 firms contacted via phone, 31 per cent provided a rough idea of fees, but 12 per cent refused to divulge costs.

Which? is calling on the FCA to review whether it should be mandatory for advisers to display fees on their websites.

Which? executive director Richard Lloyd says: “Good IFAs have nothing to fear by publishing fees online and we believe that if some firms can do it, then the others have no excuses. We need IFAs to be much more open about charges or the regulator should step in and change the rules.”

Apfa director general Chris Hannant says: “This is utterly misleading. It gives the impression that you cannot find out how much advice costs which is unhelpful.

“Advisers have to disclose their costs face-to-face so charges will never come as a surprise to a customer.

“Which? is adding to the sense of fear around going to see an adviser, so they are actually damaging consumers’ interests just for the sake of the headline. The message you take away from the press release is you shouldn’t go to an adviser because it’s all a bit murky.”

But Hannant says the more advisers can do to give consumers an indication of fees online, the more likely consumers are to engage.

He says: “Approaching an adviser without any idea of what it will cost can be intimidating: it’s like walking into a shop with no prices.”

Personal Finance Society chief executive Keith Richards says: “This report has a very narrow focus and without covering the benefits of advice, risks continuing to fuel mistrust of the sector.

“It is fair to acknowledge that there is often confusion over fee structures, but that is true of all professions and reflects the fact that fees depend on clients’ individual needs.”

Philip J Milton & Company managing director Philip Milton says: “If some advisers can publish indicative costs on their sites, then everyone should be able to.

“However, consumers should be made aware that they can speak to an adviser to get an idea of the cost of advice for their circumstances, and that fees will always be disclosed to them before they agree to go ahead.”

Andrew Tully: FCA must act to boost pensions shopping around

With the publication of its CP15/30 consultation paper earlier this month, the FCA added to the seemingly never-ending legislative and regulatory developments to pensions.

While the paper purports to deal with the aftermath of the pension freedom changes, in reality it covers a wide range of topics, including design and distribution of products, projections and the second line of defence. The irony that a paper dealing with improving communications with customers is 139 pages long and makes for fairly tortuous reading is perhaps best glossed over.

The consultation considers ways to enable customers to make informed decisions and encourage them to explore the full range of options when they reach retirement, including shopping around on the open market.

While clearly not a new concept, it is worrying – and frankly ridiculous – that only about 45 per cent of people currently shop around for an annuity. The comparable figure for drawdown is marginally higher at 55 per cent but the overall point is clear: too many customers do not shop around for the best deal, potentially leading to them getting an inferior outcome.

These are scandalously poor figures and require firm and decisive action from the regulator. Much more firm and decisive action, I would suggest, than this consultation proposes. In 2016, requirements may be introduced to help people compare annuity income from different providers, to replace wake-up packs and to supersede the Association of British Insurers Code.

While this will hopefully help more people get a better result, it seems to be tinkering around the edges, rather than making any fundamental change to dramatically improve customer outcomes.

The ABI Code prevented members from sending annuity application forms with wake-up packs unless specifically requested by the customer. The FCA proposes incorporating this into its rules and extending it to cover any retirement income solution, such as drawdown or uncrystallised funds pension lump sums, which is a positive step.

In a similar vein, where illustrations are not required but a provider wants to produce these, the FCA proposes an illustration is provided for each of the retirement income options. However, rather than simplify matters, this could result in a customer receiving a vast quantity of paperwork, which surely is not conducive to good decision making.

The consultation also includes a number of measures relating to the new pension freedoms. This greater choice means people have unlimited access to their pension pot from age 55, which obviously increases the risk it may not last their remaining lifespan. The consultation recognises this and suggests providers should demonstrate to customers the sustainability of their withdrawals.

This is a key aspect and it is important customers are told simply and clearly how long their withdrawals may last. For example, showing a customer funds may run out at a certain age and they have a very high likelihood of being alive at that date may make them pause and consider whether the action they have chosen is appropriate. The FCA needs to make sure any communication in this area is very simple for customers to understand, unlike the hugely complex, and largely meaningless, drawdown critical yield calculations.

Elsewhere, the FCA wants to treat the new option of UFPLS similarly to income drawdown. As both allow customers to achieve the same, or similar, outcomes, that is a sensible step. There are also proposed amendments to the second line of defence measures, which were brought in last March and require retirement risk warnings to be given to customers. The FCA believes firms should not be required to ask the customer questions in order to identify potential risks where funds are below £10,000 and there are no safeguarded benefits.

This is only a snippet of the changes proposed by the FCA. For those suffering from insomnia, a read of the full document will easily provide a cure. Despite that, there is a number of important issues that should not be overlooked. In particular, anyone who wants to influence the scope of the Retirement Outcomes Review, which will focus on how the reforms have affected the market and the outcomes people are getting, needs to respond by the end of the month. Given the lack of shopping around, this is a crucial area where the FCA needs to act strongly and decisively.

Andrew Tully is pensions technical director at Retirement Advantage

Advisers slam Consumer Panel chair for dismissing long-stop as ‘red herring’

Advisers have attacked FCA Consumer Panel chair Sue Lewis for branding the long-stop a “red herring” in the debate about how to widen access to advice.

Lewis made the remarks on BBC Radio 4’s Money Box as she spoke about the Government’s Financial Advice Market Review.

The review, formally launched last week, aims to improve access to advice. As part of the review the FCA is consulting on whether to introduce a 15-year limit on claims against advisers.

Asked whether the long-stop could help to address the advice gap, Lewis said: “The long-stop is actually a little bit of a red herring. [The ability to complain] needs to be there because of the long-term nature of some products. There may be other ways of pooling the liability but it needs to be there.”

Highclere Financial Services partner Alan Lakey says the comments are “unhelpful”.

He says: “There must be a recognition that the financial services industry is a different creature to that of 20 years ago.

“The old chestnut about the long-term nature of products falls apart under scrutiny. First, consumers should take responsibility if they fail to understand or review their various plans. Secondly, many other occupations which deal in long-term advice or services have a 15-year long-stop.”

Yellowtail Financial Planning managing director Dennis Hall adds: “Sue Lewis has a vested interest in looking after consumers, but we cannot dismiss this as a red herring.

“The lack of a long-stop is one of a number of issues which impacts on access to advice. It affects succession planning and whether we can get new blood into the profession. Young people will not be willing to have liabilities hanging over them for the rest of their life when that is not the case in any other profession.”

Personal Finance Society chief executive Keith Richards, also speaking on Money Box, said: “Advisers are the only profession which carry unlimited liability for their advice.

“There is no question that the long-stop should be brought back in. The law was changed [from] when lots of 25-year endowments and whole of life policies were sold, so [ending the long-stop] was done for a fair reason but that now needs to change.”

Lewis argued that simplified advice or simplified products were the key to improving access to advice.

She said: “The trick we’re trying to pull here is to simplify and make advice more accessible and cheaper for consumers with relatively small amounts of money.

“You might look at what I think of as the pharmacy model: you can speak to a pharmacist, get some advice and they can sell you a limited range of products.”

The FCA’s long-stop options

The FCA says it is considering the following options as part of its long-stop consultation:

• Maintain the current regime
• Introduce a long-stop of 15 years or a different time period “recognising the long life of financial services products”
• Introduce varied limitation periods linked to the terms of products
• Strengthen professional indemnity insurance so advisers have sufficient cover to meet long-term claims
• Set up a compensation fund which all advisers contribute to and which would pay out in the event of a justified claim older than 15 years

The long-stop: The story so far

1980: Limitation Act imposes time limits within which a party must bring a legal claim, including a 15-year long-stop for negligence claims

2000: Financial Services and Markets Act introduced. Regulators say this overrides time limits of Limitation Act

2007: FSA reviews the case for a long-stop

November 2008: FSA announces it will not introduce a long-stop

March 2014: In its 2014/15 business plan the FCA says it will consider the case for a long stop

July 2014: FCA says talks have stalled as the long-stop may be deemed a constraint on human rights under an EU directive

December 2014: FCA confirms the EU directive would not stand in the way of a long-stop

Advisers question FSCS U-turn on Rockingham claims

Advisers have questioned the Financial Services Compensation Scheme’s U-turn on ARM Asset Backed Securities claims.

Last week the FSCS announced it is reconsidering claims against Rockingham Independent and other firms over advice to invest in ARM bonds.

In February 2013 the lifeboat scheme ruled out compensating those who had invested in the bonds through Rockingham.

ARM issued bonds based on life settlement policies which were sold to investors in the UK and Europe without the appropriate permissions.

The UK distributor of ARM products was Catalyst Investment Group, which sold the bonds through IFAs.

Out of the 2,000 UK customers who invested a total of £75m into ARM, at least 200 sales were advised by Rockingham.

As ARM is not authorised by the FCA, investors are not covered by the FSCS, but the scheme can still consider claims against advisers that are regulated in the UK.

The FSCS said in 2013 that while Rockingham may have given poor investment advice, this did not cause the losses.

It said the losses were caused by the decision of the Luxembourg regulator to reject ARM’s application for authorisation, and therefore claims could only be made against advisers “under very limited circumstances”.

But the lifeboat scheme says it has received new evidence from claimants and other third parties.

It has identified 70 claims where there is evidence the adviser failed to act on information it held at relevant times about the authorisation status of ARM.

The FSCS says: “In light of this evidence, we believe some ARM investors can now make successful claims against failed financial advisers if negligent advice can be proven.”

Page Russell director Tim Page says: “Just when advisers thought we could put the ARM debacle to bed, it feels like it is never going to end. I would question the nature of this evidence and whether there should be a cut-off point after which claims cannot be looked at again.

“The fact the FSCS is compensating consumers using other people’s money means they are too eager to widen the envelope on what claims are valid.”

Aurora Financial Planning chartered financial planner Aj Somal says: “This is further evidence of the open-ended nature of advisers’ liabilities. If the evidence is compelling, then it is understandable for the FSCS to look at the claims again, but I do not understand why it has taken so long for this additional information to come to light.

“If this leads to an increase in FSCS levies it will put firms’ finances under further pressure.”

The FSCS will write to all potential claimants to inform them of the decision, while those who remain unaffected will also be told there is insufficient evidence to support their claim. Claimants who have already been compensated up to the FSCS’s investment limit of £50,000 from a successful claim against Catalyst will not have their cases reassessed. The FSCS has already paid out compensation for 3,700 claims against Catalyst for its role in promoting ARM bonds.

Timeline

September 2011: FSA fines Rockingham £35,000 and imposes partial bans on its directors over sales of ARM bonds and unregulated collective investment schemes

March 2012: Rockingham is placed into liquidation

August 2012: The FSCS says it is investigating whether it should compensate Rockingham clients

November 2012: Rockingham is declared in default

February 2013: The FSCS rules out compensation for Rockingham ARM investors

October 2013: The FCA censures Catalyst for misleading investors when promoting bonds issued by ARM

November 2013: The compensation costs relating to Catalyst trigger a £30m interim FSCS levy on investment advisers for 2013/14, which is later delayed until 2014/15

October 2015: The FSCS says it will reconsider a number of claims from ARM investors against Rockingham after new evidence comes to light

Are advisers missing a trick on business protection?

Advisers have a great opportunity to offer business protection to company direct-ors but the market remains untapped. Recent research we conducted into the nation’s SMEs highlights the risks they face.

Indeed, it found a third have no insurance at all for their debts, despite the fact the average SME owes nearly £350,000 at any one time. If anything unexpected was to happen to a key person in terms of illness or death, many SMEs could be left struggling to deal with the loss or absence of a vital cog in their business as well as the need to repay substantial debt.

The challenge for advisers is going to be making business owners aware of these risks. Of the SMEs we surveyed that did not have cover, 72 per cent did not see any need to insure their business debts. Access to the company directors is key: of the businesses that do have insurance cover, 89 per cent had been advised to consider taking it out by their adviser or bank. In short, once directors are made aware of the risks posed by unprotected corporate debt they usually do something about it.

Some debts are more risky than others, such as short-term financing or debt that must be repaid annually. For instance, SMEs using credit cards has rocketed from just 3 per cent in 2011 to 23 per cent this year. Similarly, SME debts of over £50,000 in directors’ loan accounts have increased from 20 per cent to 33 per cent.

These accounts present a particular risk as awareness levels of how they actually work are not as high as they should be. Almost a third (28 per cent) of the directors we asked did not know their DLA needed to be repaid in the event of their death.

This should be of particular interest to advisers as directors making loans to the business often do so using funds derived from a personal mortgage secured against their home.

Even directors who diligently protect their mortgage borrowings with personal life cover may still be exposing their business to unforeseen credit risks in the event of their death if they use the proceeds of a mortgage to fund their business via their DLA. If the director were to die, the personal life policy could be used to repay the mortgage but the company would still owe the directors’ estate the money released from the mortgage to fund the business.

So what can advisers do to change SMEs’ attitudes when it comes to business protection? Well, in the example above, they could suggest to the business owner that the company takes out protection on the director as a key person, thus enabling the DLA to be repaid to the estate, which could in turn use the money to repay the mortgage debt.

The lack of business protection in the UK is mainly due to a lack of knowledge of the risks and a lack of awareness of the solutions. If advisers can sit around the same table as business owners and their accountants they can help them understand this. The market demand is there and advisers are in an ideal position to spot the opportunities.

Stuart Halliwell is market development manager, specialist protection, at Legal & General

Ian McKenna: Nothing to fear from robo-advice

Digital advice is commanding increasing attention from regulators, consumer journalists and even politicians. Multiple speakers at the FCA’s recent three-day forum on the subject made it clear that it is not a matter of if, but when, these services become a major force in the UK personal finance industry. The sheer number of start ups I am speaking to makes me sure we will see a tsunami of new services appear early next year.

One thing I do not understand is why so many really good advisers appear intimidated by the idea of digital advice. A couple of weeks ago, I was discussing the subject with Billy Burrows and Paul Lewis on BBC Radio 4’s Money Box. There is probably far more Billy and I agree on than disagree about. For example, we both believe it is really important for people to have financial advice and that we need to find ways to reduce the cost of that advice.

To me, this is what digital advice is all about. It can make advice a utility available to everyone, rather than a luxury reserved for the wealthy. Advice should be affordable, accessible and understandable.

In the UK, we have what many financial services regulators around the world increasingly recognise as the gold standard for advice. Our framework is so respected that it is being replicated in many other countries. However, this all comes at a very real cost: such advice is only cost effective for those with significant wealth. This is where technology can help. Not everyone has complex circumstances and, when they do, a decent automated advice process can identify if they need to be guided to more specialist, inevitably human, advice.

Digital services are available 24/7. Computers do not mind if the customer wants to go over the same information again and again until they are really sure they understand it. Customers can take their time to explore their options at their leisure.

Billy was clear during the discussion that advice is a journey customers will wish to consider over time. This really lends itself to using technology that enables the customer to review their options at their own pace, reflect on the information provided and revisit the process to study more. Indeed, digital Advice should complement traditional advice processes.

Cynics will stress that machines sometimes get things wrong. But so do humans. Technology and algorithms are improving decisions all around us every day in thousands of industries. Millions of options can be considered in seconds and the results presented and ranked. In fact, such services are ideally suited to supporting a financial advice process. No financial adviser with a good value proposition has anything to fear from digital advice.

While some services will seek to target consumers direct, digital advice pioneers in the US have learnt it is far better to partner with traditional distribution than compete with it. Helping advisers with clients deliver lower cost services is more economically viable than trying to attract them directly. Very soon, having software to deliver digital advice to clients will be as natural for an adviser as using a platform.

To make the most of these emerging opportunities, advisers need to be learning about the various ways digital advice can be deployed in order to select the best solution for the clients. I will provide guidance on the options, their strengths and their weaknesses in these columns over the coming months.

Ian McKenna is director of Finance & Technology Research Centre

Schroders hires head of strategy for MAPS

Schroders has appointed Esther Nass-Fetzmann as head of strategy in the firm’s Multi Asset Investments and Portfolio Solutions product team.

In the newly created role, Nass-Fetzmann will focus on the European market and report to the asset manager’s head of UK and Europe Product & Manager Solutions, Henriette Bergh.

Nass-Fetzmann joins the investment manager from BlackRock where she most recently worked as director and head of UK iShares ETF sales.

Schroders head of multi-asset investments and portfolio solutions Nicolaas Marais says: “I am very pleased that Esther has chosen to join MAPS. Her commercial and product experience is invaluable as we continue to build our European Multi-asset Investments and Portfolio Solutions business.”

In August, Schroders hired Chris Hsia as product manager and Mei Huang as a quantitative analyst within the MAPS team.

Earlier this month, Schroders’ veteran fund manager Rosemary Banyard said she is to exit the firm to pursue “other opportunities”.

Banyard, who has been at Schroders for 17 years, will continue at the group until 31 March 2016.

Govt to launch consultation over GARs advice confusion

The Government will launch a consultation to address confusion around when advice is required for people with guaranteed annuity rates who want to access their pension pot.

Under rules introduced following the introduction of the pension freedoms in April, the Government mandated that savers with safeguarded benefits worth more than £30,000 get regulated advice before taking their pot as cash. This includes those with GARs attached to their policies.

However, in June Money Marketing revealed widespread confusion among providers about how GARs should be valued when assessing whether or not a customer is required to take advice.

Addressing the National Association of Pension Funds conference in Manchester today, pensions minister Baroness Ros Altmann said: “I am going to be launching a consultation in the autumn for simplifying the valuation of guaranteed annuity rates to clarify for providers and customers who it is that needs to take financial advice.

“We will [also] be gathering evidence on what is happening to people overseas who might be required to take advice.”

Altmann also said the Government “can’t be complacent” about the success of automatic enrolment as almost two million small firms have yet to reach their staging date.

However, she played down the prospect of raising the minimum contribution level during this Parliament. Once the reforms are fully rolled out in 2018 the minimum employer contribution will be 3 per cent, with employees putting in 4 per cent.

Altmann said: “We all know there is a need to increase contribution rates because the rates right now are inadequate for providing a decent amount of pension.

“However, we have just started on this process of getting employers in. More than 95 per cent haven’t even started yet.

“If we start talking about huge increases in contributions before they get comfortable with the current programme, then I think we would be shooting ourselves in the foot.”

Earlier today the pensions minister confirmed plans to introduce an automatic transfer system for small pots and to amend rules so employers can offer so-called ‘Defined Ambition’ pensions have been shelved.

Altmann insisted both reforms will need to be pursued in the future, although she did not set out a timescale for their introduction.

Advisers fear hike in network fees and ‘stealth taxes’

Advisers are fearing further increases in network fees after two of the industry’s most prominent groups hiked costs, while a rival warns further “stealth taxes” are also possible.

Intrinsic announced last week it will increase fees following an “unprecedented” rise in its Financial Services Compensation Scheme levy. The network told members it faced a bill of £5.5m, almost £3m more than it had expected.

Around half the cost of the increase is expected to be passed on to appointed representatives.

Independent advisers will see a £12 a week increase to £123.92, restricted advisers will pay £10.50 more a week to £88.73 and mortgage and protection advisers will pay an additional £9.80 per week to £48.80.

Separately, Tenet announced earlier this month it would begin to charge members of its investment and pensions division TenetConnect £150 to carry out file checks on drawdown cases.

Advisers will be able to avoid the charge if they submit to a series of Tenet-devised case studies, after which point they will not have to have cases signed off by a specialist.

Derbyshire Booth managing director Greg Heath says advisers are beginning to question the benefits of the network model in the face of rising costs.

On the Tenet charge, Heath says: “If you do a lot of cases in these areas, then that can easily become a significant push on your costs overall.

“Other networks will start to increase their costs as well, and with all this extra bureaucracy that’s been created by pension freedom you can see why people are starting to think they might be better off going directly authorised. I know a few who have done it who say it’s the best thing they’ve ever done. It’s a lot more work, but they get to choose what services they need and find what suits them.”

Threesixty managing director Phil Young describes Tenet’s £150 bill as a “stealth tax” that is likely to become more common as networks try to keep costs down.

“In the old days, networks used to charge basically a flat rate of around 25 per cent of revenue.

“But because it’s so price-sensitive competing for network advisers, we’ve seen a few cut that down to what might look like about 5 per cent and then bring in some stealth taxes along the way.”

Yellowtail Financial Planning managing director Dennis Hall says advisers are likely to find their network bills will continue to increase.

He says: “These costs will continue to creep up until they either become uneconomic and people start to think the model is broken.”

Hall says advisers are increasingly questioning the value of the remaining as a network member.

He says: “Historically you might join to get a better commission deal or even professional indemnity, but for the better players out there you have to think you could be doing it cheaper by yourself.”

Swallow Financial Planning Andrew Swallow says: “The network model is a dinosaur structure and its time is no more. I can see some consolidators still proving attractive to advisers, and even some service providers, but the days of the one-man-band insurance salesman that used to drive these networks are now gone.”

Unbiased.co.uk revamps directory pricing

Unbiased.co.uk has revamped its pricing options for advisers wanting to be listed on its directory.

Currently Unbiased.co.uk only offers an ‘enhanced’ package which costs £39.99 a month and gives firms access to an unlimited number of enquiries and its media enquiry system Bluebook.

This option remains unchanged for advisers already on the directory, but is no longer available for new firms.

New firms are being given three options: ‘basic’, ‘lite’ and ‘plus’.

The basic package is free and means the firm appears in search results, but without its contact details.

The lite package costs £29 per month plus £30 for every accepted lead. Advisers can view details of new business enquiries and decide whether to accept or reject the lead.

The plus offering costs £59 per month. The first lead each month is free and subsequent leads cost £30 each.

This option also allows firms to accept and reject leads, as well as access a call tracking system and the Bluebook.

Unbiased.co.uk chief executive Karen Barrett says: “All advisers advertising on Unbiased.co.uk with our current product can stay on that product and all leads they receive are all inclusive.

“Consumers remain in control of the adviser they select through the search details they input, with the best matching advisers being shown.

“We didn’t want to change our existing product, but we have had advisers telling us they want to advertise with us in a different way.”

Advisers optimistic as FCA launches long-stop review

Advisers are optimistic on the introduction of a long-stop after the FCA announced it would consult on the issue as part of the Financial Advice Market Review.

In a consultation paper on the FAMR jointly published by the FCA and the Treasury earlier this week, the regulator says it will evaluate the options around implementing a long-stop.

The FCA says it will consider the following options: maintaining the current regime, introducing a long-stop, introducing varied limitation periods linked to the terms of products, strengthening professional indemnity insurance, and setting up a compensation fund.

It says the long-stop could be for 15 years, or “a different time period recognising the long life of financial services products”.

The FCA says enhanced PI cover for advisers would include cover sufficient to meet claims relating to long-term advice, whether the firm is still in business or not.

The compensation fund would pay out in the event of a justified claim older than 15 years against an individual firm, which all firms would contribute to. However, unlike the Financial Services Compensation Scheme, the fund would not require the firm to be insolvent before paying out.

Apfa director general Chris Hannant says the inclusion of the review in the FAMR increases the chances of a positive outcome for advisers.

He says: “The FCA recognises the challenges of unlimited liability for advisers, but has also been cautious of its statutory duty to protect consumers. The FAMR and its emphasis on benefiting consumers beyond those who can currently afford advice means there is a stronger will to make changes.”

Evolve Financial Planning director Jason Witcombe adds: “The FAMR makes change more likely as there seems to be a recognition that a solution must be found. It is not reasonable that advisers have to live in fear of complaints throughout their retirement.”

Hannant says a 15-year long-stop is by far the most preferable option, and a compensation fund would only spread the cost of liability rather than reducing it.

He says: “We feel very strongly that unlimited liabilities are a deterrent to investment in the sector and increase the cost of advice.

“There is also a fundamental question of justice. I recently had a call from the daughter of an adviser who had passed away and whose wife – who had been made a partner in the business but is now suffering from Alzheimer’s – is being pursued for an ombudsman complaint for advice given well over 15 years ago. There is no way the family can construct a meaningful defence to that claim.”

The regulator said it would consider the case for a 15-year long stop on complaints to the Financial Ombudsman Service in its 2014/15 business plan, published in March 2014.

Talks were delayed after the FCA pointed to an EU directive as a barrier to progress. But in December the regulator confirmed the directive would not stand in the way of a long-stop.

Investment Association launches review as members threaten to quit

The Investment Association is launching a consultation on how it engages with its members after several groups suggested they will not be renewing their membership with the trade body.

Earlier this week M&G, Schroders, Fidelity Investments, Aberdeen and Invesco Perpetual said they will consider quitting the association, prompting chief executive Daniel Godfrey to leave the IA “by mutual agreement”.

Guy Sears, the director of risk, compliance and legal has been appointed interim chief executive.

Helena Morrissey, chair of the IA, today restated the trade body’s commitment to working towards greater transparency in the industry but says she recognises the need for a review into member engagement.

She says: “The Association’s members have always been conscious of their responsibilities in looking after other people’s money and recent events should not put that in doubt.

“The board reaffirms its commitment to supporting positive change in the interest of members’ clients. In particular, it will continue the work already done to ensure that consumers receive clear comparable information on which they can make good investment decisions.”

She continues: “The issues some members have voiced have been about the scope of the association’s agenda and the style and approach of engagement with members in recent years. Whilst our overall remit and focus remains on highlighting the important role that asset managers play in terms of addressing the pensions and savings needs of individuals, supporting the growth of companies and contributing to the UK economy; there is a need to consult on how the association prioritises against a packed agenda for the industry.”

The outcome of the consultation will influence the direction the new chief executive takes, Morrissey says, adding that in the meantime it is “business as usual”.

Sears says: “We understand that recent news has been unsettling, but the Investment Association remains focused on its ongoing work. As a membership organisation, differing views comes with the territory but we have a long history of working together and building consensus for the better and we will return to that approach.”

The pension freedoms and the impending competition review from the FCA will be areas the IA focuses on, Sears says, as well as ensuring “capital markets are not only free from abuse but positively work well for investors.”

He says: “This is a time of change and opportunity for the industry and the key now is to move forward collectively but there should be no doubt that the Investment Association and its members continue to be united by the belief that the success of our industry is completely aligned to the quality of the service we provide to clients large and small.”

Intrinsic hikes AR fees to meet ‘unprecedented’ FSCS levy

Intrinsic is to hike adviser fees from January 2016 to help it meet an “unprecedented” rise in the cost of regulation.

In a letter sent to advisers last week, the Old Mutual-owned network said its FSCS bill was £5.5m, £2.8m more than was expected.

Intrinsic says it has absorbed around half the cost of the increase, with the remainder passed on as fees to appointed representatives.

As a result, independent advisers will see a £12 a week increase, to £123.92.

Restricted advisers will pay £10.50 more a week, to £88.73.

Mortgage and protection advisers will pay an additional £9.80 per week, to £48.80.

A spokesman says: “The fixed fees advisers pay to Intrinsic are a reflection of the costs we incur as a network, including those arising from regulatory sources. This year’s unprecedented rise in the amount Intrinsic has been charged for the FSCS levy means we will have to increase fees from 1st January 2016.

“We appreciate that increases in fees are never welcome, but we have consulted widely with our Appointed Representatives since June on this subject. We believe that our approach, which will see Intrinsic share the burden of this cost increase, reinforces the degree of protection that our advisers receive by being part of a strong network.”

Earlier today, the network’s results showed it made a £1.3m loss in 2014, mainly due to boosting provisions against complaints.

Investment Association chief executive Daniel Godfrey exits

Investment Association chief executive Daniel Godfrey is leaving the trade body after a flurry of asset managers said they were considering quitting the association.

A source close to the situation said Godfrey was departing “by mutual agreement” with the board, as “collectively they felt a new leader was needed at this time”.

An interim chief executive will be appointed from within the IA staff, while a full search will be carried out by the board for a replacement for Godfrey.

The says: “The board decided now is the time for new leadership for the challenges ahead for the industry and the next stage of development, a new leader was inevitable.

“There was no one trigger event. You can see the next two years are going to be very important and the industry is developing and adapting to bigger trends, such as disintermediation, regulatory changes coming and a wide variety of transformative events on everything from infrastructure, to platforms, to transparency on fees.

“IA has a part to play in this and [Godfrey] has reflected on all that and decided now is the right time for new leadership.”

However, a source close to Godfrey said he had “no plans to resign” ahead of the crisis board meeting on Tuesday.

This week has seen M&G and Schroders say they will quit the organisation, while Fidelity Investments, Aberdeen, Invesco Perpetual, JP Morgan Asset Management and Neptune are considering resigning from the association when their current membership expires.

BSA rejects involvement in trade body mega-merger

The Building Societies Association has rejected proposals to include it in a trade body ‘mega-merger’.

An independent review was published in July after a consortium of 10 lenders pushed for a consultation to address concerns about lobbying costs and to reduce the amount of work duplicated.

Former Ofcom boss Ed Richards, who led the review, made no formal recommendations but set out options ranging from no change to full consolidation of 12 trade bodies.

However, the BSA, which was left out of the early stages of the review but has been subsequently added, argues it should remain as a standalone trade body.

In a letter to Richards, BSA head of mortgage policy Paul Broadhead says: “We have consulted fully, and in a range of forums, with the BSA membership and with the BSA Council (effectively our board). This consultation resulted in unanimous agreement that the BSA should not form part of any new entity due to the distinct nature of the sector, something that you recognised may be the case in your report.

“The building society sector is truly distinct from the banking sector, this includes corporate structure, legislative status and in some areas it is subject to additional layers of regulatory guidance.”

However, Broadhead says that collaboration between trade associations could be improved.

He adds: “We have taken deliberate steps to coordinate more closely with the Council of Mortgage Lenders on matters of common interest this year and we would welcome the opportunity to work more closely with any new entity in which we may have commonality in the future. We would be pleased to continue an open dialogue with the review team as the project progresses further.”

Robin Geffen responds to market volatility

By Robin Geffen, Fund Manager & CEO

This is a testing time for investors. Over the past year the market has been driven forward by strong fundamental trends underpinned by changes in the real world, but over the past month a more animalistic sentiment has sent shares plunging. As we consider the remainder of the year, we must ask ourselves whether these fundamental forces will reassert themselves and allow stock prices to make progress.

Click here to read the full article.

Important Information: investment risks

The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested. Investments in emerging markets are higher risk and potentially more volatile than those in established markets. Please remember that past performance and forecasts are not a reliable indicator of future performance. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. The content of this document is formed from Neptune’s views and we do not undertake to advise you as to any change of our views. Neptune does not give investment advice and only provides information on Neptune products. Please refer to the Prospectus for further details.

Perspective swings to £500k profit

Advice group Perspective returned to profit in 2014, figures published on Companies House reveal.

The firm reported a loss of £5m for 2013, but swung back to a pre-tax profit of £493,383 for the year to 31 December 2014.

Executive chairman Paul Hogarth injected £2m into the business at the start of 2014, as it moved to defer payments to some acquired firms.

Total staff costs, including directors’ remuneration, fell 22 per cent from £10m in 2013 to £7.8m last year. The firm’s average headcount for the year dropped 15 per cent from 225 to 191.

Overall administrative expenses fell 18 per cent from £19.1m to £15.7m. Turnover increased from £16.9m to £17.1m, and cost of sales dropped from £1.5m to £1.3m.

Group operations director David Hesketh says the firm is “satisfied” with the underlying level of trade in 2014.

Tony Wickenden: HMRC’s ‘game changer’ approach to tax avoidance

Over the past few articles I have looked at what is required for the issue of follower notices, accelerated payment notices and partnership payment notices.

All these are intrinsic to HM Revenue & Customs’ strategy for getting tax from those who have adopted what, in its view, amount to aggressive tax avoidance schemes without having to wait for the outcome of the relatively long- winded assessment and appeals process. This strategy is widely regarded as a bit of a game changer, and it is where a lot of the recent publicity over tax avoidance has been focused, especially with the recent failure to have the payment notice process ruled invalid by judicial review.

Just to be clear, though, the APN process does not deny the right to appeal against an assessment. If you have a notice issued then the tax ‘at risk’ will ‘rest’ with HMRC pending the outcome of the appeal, not with the taxpayer.

The HMRC rationale for this is “it’s only fair” and “goes with the territory” that you have to accept if you enter into a scheme that has a Dotas reference number.

Of course, the recent proposals and draft regulations to expand the number of schemes for which Dotas reference numbers can be issued are a really important part of this strategy to increase the number of potential APNs – generating transactions that are in the pipeline.

The ability to “get tax in” on account and ahead of the appeals process being considered has understandably been seen as highly newsworthy. This is especially so as a number of relatively rich and relatively famous people have been affected.

But despite all this interest in advance payments, it is important that financial planners and their clients do not lose sight of the much bigger picture in relation to the relentless HMRC fight against what it sees as unacceptable, aggressive tax avoidance. ‘Avoidance and legal interpretation’ does after all contribute about 24 per cent of the £35bn tax gap.

A really good reference point is the Government policy paper on tackling tax evasion and avoidance. It has a very strong focus on evasion, especially offshore, as this is a strong contributor to the tax gap. But it also sets out a very clear and multi-faceted strategy to combat domestic tax avoidance. Yes, it was issued under the Conservative-LibDem coalition but it was issued in March and its contents remain, as far as we know, very much part of the policy of this current Government.

In the section on domestic avoidance (not an explanation of how to avoid doing the washing up), HMRC states that over a relatively short period the strategy has transformed the way avoidance is tackled.

Rather than just acting to block individual abuses, the radical new approach has altered the underlying economics of avoidance by accelerating the payment of disputed tax and stemmed the supply side by acting against the highest-risk tactics of avoidance promoters.

These actions have been a significant leap forward, but more can be done.

Intelligence-led approach

In the March Budget, the coalition announced it would introduce a range of new measures for those who persistently enter into tax avoidance schemes that HMRC defeats.

Avoidance is the preserve of a persistent minority. The measures that ministers have taken already are working to reduce that minority. Among those that remain, there are some who avoid tax again and again, often using more than one scheme each year, knowing that some will fail but hoping that one will not.

The Government also announced it is asking the regulatory bodies that police professional standards to take a firmer lead in setting and enforcing clear professional standards for those who help and promote avoidance. This is to protect the reputation of the tax and accountancy profession as a whole as well as for the greater public good.

No-one can be in any doubt about the level of official commitment to stamping out what is thought to be aggressive avoidance. The days of relying on the long-winded process of litigation have long gone.

That is not to say litigation has ceased to be part of the anti-avoidance strategy. It has just been substantially supplemented by publicity (naming and shaming) and legislation, both in the shape of targeted anti-avoidance rules and the general anti-abuse rule.

Tony Wickenden is joint managing director of Technical Connection