Jupiter CFO to step down

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.”

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

Providers call for tighter SSAS regulation

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

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.”

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

Aberdeen Asset Management’s Chou Chong quits after 21 years

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.

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

IA in talks with Treasury over tax break for bonds

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.

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

Tenet business development boss to join SimplyBiz

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.

‘Banned’ self-cert loans set for return

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

Ian McKenna: What must platforms do to survive?

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

Money Marketing sweeps the board at personal finance media awards

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.

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

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

Danby Bloch: Handle alternative investments with care

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

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

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.

FCA starts collecting evidence on advice review

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.”

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

Pressure builds on Europe to delay Mifid II

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

Six arrested over auto-enrol fraud allegations

Six people were arrested earlier today in Nottingham and Derby over allegations of fraud relating to automatic enrolment.

It is the first time anyone has been arrested for auto-enrolment fraud.

The arrests were part of a joint operation involving Derbyshire and Nottinghamshire Police, The Pensions Regulator and the Employment Agency Standards Inspectorate.

In Derby three men aged between 28 and 38 were arrested, while a 31-year-old woman was arrested after voluntarily attending a police station in the city.

A 35-year-old man was also arrested at a business in Nottingham city centre.

All the arrests were on suspicion of fraud and are part of an ongoing criminal investigation into allegations of wrongdoing relating to auto-enrolment of staff into workplace schemes and underpaying workers.

The Pensions Regulator declined to comment further.

Last week, TPR published the first figures showing the number of times employers have questioned the regulator’s auto-enrolment enforcement action.

There were 379 reviews of statutory notices handed out by the regulator for breaches of auto-enrolment duties up to September 2015.

Of these, 279 resulted in the notice being “revoked, substituted or varied”.

Scott Gallacher: Are you about to give your business away for free?

A retiring IFA recently sold his practice to a well-known national wealth manager. When it started undertaking its reviews of clients’ planning, one client was surprised enough to seek me out. I undertook my own review and concluded although his Isas and pensions (£450,000 overall) should be updated and refreshed, the basic structure was perfectly sound, flexible and appropriate: certainly no need for big changes or costs.

The incoming adviser, however, had different ideas. To start with, everything was to be moved to its preferred platform. I use various platforms but, in this case, I did not see how the change benefited the client. Next, the whole portfolio was to go into just one relatively untested fund. A good multi-asset, multi-manager fund can give a decent spread but diversification should mean more. One fund is still the creation of one investment committee.

But what really made the client’s eyebrows hit the ceiling were the charges: £500 for the review, £13,500 (3 per cent) for making the changes and then £4,500 (1 per cent) a year from then on. If you are going to charge a first-year fee of £18,000, you had better be delivering some truly world-class benefits. However, with very few discernible benefits in the advice, my dismaying conclusion was that, once again, a client was simply being taken advantage of.

But there is another intriguing point. Adviser firms typically sell for three times the annual income, so on £450,000 (assuming historic trail of 0.5 per cent) the retiring IFA might receive £6,750 for this client.

Presumably the IFA knew what was going to happen to his clients and so the question arises: if he thought it was acceptable for his clients to pay such high fees for these changes, why did he not do it himself? Not only would he double his £6,750 to an impressive £13,500 but he would also double his yearly earnings.

But he did not. Instead, he sold out in the knowledge the new owners would immediately scoop up £2 for every £1 he received. That means once they have paid the outgoing IFA his £1, the new owners have effectively been handed a free business. Why would any financially literate business owner do that?

My suspicion is that, like me, he did not really believe it was justified to exploit his clients like this and that is why he had never done it himself. The fact he then allowed it to happen under the new advisers could be for many reasons. Perhaps he had no other choice financially; perhaps he was pressed by family problems or ill-health. We will probably never know.

But we do know that being an IFA is all about trust and when we come to pass over the reins, we should honour the client’s trust by taking just as much care as we have done at every other stage.

I know balancing ethical duties and commercial realism is easier said than done but, at the very least, we owe it to our clients to pass them to somebody we trust in turn. Hopefully, that will be somewhere they will not be hurried into an entirely new model involving major costs. At least that way they would have breathing space to take stock.

Scott Gallacher is director of Rowley Turton