What is the biggest risk to the success of pension freedoms?

What is the biggest risk to the success of pension freedoms?

Time for a fresh look at investment committees

All too often governance is considered a dull topic but time and time again it proves critical for outfits of all shapes and sizes. Take Fifa, for example. It would seem ex-president Sepp Blatter did not pay a great deal of attention to governance and look where that has left the world of football. The board of Volkswagen may also be regretting a thing or two in this arena.

Governance poses no shortage of challenges for the financial services sector, too, where the regulator – driven by suitability – requires advisers to demonstrate they are looking after the best interests of the client at all times. A burgeoning issue for many adviser firms is the requirement for due diligence and oversight of third-party or sub-advised services brought about by the launch of centralised investment propositions.

The issue of effective governance is, of course, as pertinent for sole traders as it is for larger practices, whether or not they have established an investment committee. It is also equally important for advisers with existing committees to regularly check the group is still relevant to the proposition and processes used to service their clients.

Governance certainly should not be dismissed for advisers that have moved to a Cip. In many ways the due diligence and oversight an investment committee brings in this situation is even more critical.

In both establishing and managing an investment committee there are three main areas to consider in order to ensure the process runs effectively, observes best practice and, crucially, serves the best interests of the clients.

First up is the role and purpose of the investment committee. It may sound simple but this is a critical stage in both setting up the committee itself and for ensuring the group is fulfilling its ultimate purpose. Some objectives, such as monitoring charges, are likely to prove more tangible than ensuring suitability, for instance. But the role of the group can be broken down into three clear categories: maintaining the best interest of clients, outlining and overseeing the group investment strategy and monitoring/mitigating group risk.

The next logical step is to start forming the structure of the investment committee. Choosing the right people for the role – both internal and external – is essential, with each member bringing a unique balance to the group. Advisers should ask themselves a number of important questions during this process, including what constitutes a quorum and how often individuals will be rotated to keep things fresh. More broadly, what is the committee's relationship to other committees and to whom will it report?

Last but by no means least in terms of importance is to put in place a clear process for investment committee meetings. The key here is to be methodical and structured with diarisation, minutes and actions, and to carefully consider if and how to distribute the output internally and to clients. These may be details but they can mean the difference between whether or not the committee is ultimately able to fulfil its role in the eyes of the regulator. With the FCA wealth management review due to get under way in the first quarter of next year, there has arguably never been a better time to be on the front foot.

It may be true in an industry where oversight and regulation play an ever increasing role the concept of a committee often conjures up negative thoughts: “A group of unfits, engaged by the unwilling to do the unnecessary” being just one definition flagged up in a Google search. However, channelling efforts into the set-up of an investment committee should allow advisers to remain ahead of the competition while at the same time protecting the value that has already taken time and energy to build into their business.

Jamie Farquhar is director at Square Mile Investment Consulting and Research

Time for a fresh look at investment committees

All too often governance is considered a dull topic but time and time again it proves critical for outfits of all shapes and sizes. Take Fifa, for example. It would seem ex-president Sepp Blatter did not pay a great deal of attention to governance and look where that has left the world of football. The board of Volkswagen may also be regretting a thing or two in this arena.

Governance poses no shortage of challenges for the financial services sector, too, where the regulator – driven by suitability – requires advisers to demonstrate they are looking after the best interests of the client at all times. A burgeoning issue for many adviser firms is the requirement for due diligence and oversight of third-party or sub-advised services brought about by the launch of centralised investment propositions.

The issue of effective governance is, of course, as pertinent for sole traders as it is for larger practices, whether or not they have established an investment committee. It is also equally important for advisers with existing committees to regularly check the group is still relevant to the proposition and processes used to service their clients.

Governance certainly should not be dismissed for advisers that have moved to a Cip. In many ways the due diligence and oversight an investment committee brings in this situation is even more critical.

In both establishing and managing an investment committee there are three main areas to consider in order to ensure the process runs effectively, observes best practice and, crucially, serves the best interests of the clients.

First up is the role and purpose of the investment committee. It may sound simple but this is a critical stage in both setting up the committee itself and for ensuring the group is fulfilling its ultimate purpose. Some objectives, such as monitoring charges, are likely to prove more tangible than ensuring suitability, for instance. But the role of the group can be broken down into three clear categories: maintaining the best interest of clients, outlining and overseeing the group investment strategy and monitoring/mitigating group risk.

The next logical step is to start forming the structure of the investment committee. Choosing the right people for the role – both internal and external – is essential, with each member bringing a unique balance to the group. Advisers should ask themselves a number of important questions during this process, including what constitutes a quorum and how often individuals will be rotated to keep things fresh. More broadly, what is the committee's relationship to other committees and to whom will it report?

Last but by no means least in terms of importance is to put in place a clear process for investment committee meetings. The key here is to be methodical and structured with diarisation, minutes and actions, and to carefully consider if and how to distribute the output internally and to clients. These may be details but they can mean the difference between whether or not the committee is ultimately able to fulfil its role in the eyes of the regulator. With the FCA wealth management review due to get under way in the first quarter of next year, there has arguably never been a better time to be on the front foot.

It may be true in an industry where oversight and regulation play an ever increasing role the concept of a committee often conjures up negative thoughts: “A group of unfits, engaged by the unwilling to do the unnecessary” being just one definition flagged up in a Google search. However, channelling efforts into the set-up of an investment committee should allow advisers to remain ahead of the competition while at the same time protecting the value that has already taken time and energy to build into their business.

Jamie Farquhar is director at Square Mile Investment Consulting and Research

ECB policy strengthens investment case for value & banks

By Rob Burnett, head of European Equities at Neptune

The ECB delivered a strong package in its latest policy announcement that managed to find the right balance between supporting the economy and not endangering the banking system.

The EU banking system is very sensitive to negative rates and, if the ECB were to have cut rates by too much, it could have created systemic stress. The market was expecting cuts of around 12-14bps and so the 10bp cut in the deposit rate was slightly easier on the banks than anticipated. More importantly, all the other measures announced were supportive of banking profitability.

Read full article:

Important Information

Investment risks

This fund may have a high volatility rating and past performance is not a guide to future performance. 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. References to specific sectors are for illustration purposes only and should not be taken as a solicitation to buy or sell these securities. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only.

ECB policy strengthens investment case for value & banks

By Rob Burnett, head of European Equities at Neptune

The ECB delivered a strong package in its latest policy announcement that managed to find the right balance between supporting the economy and not endangering the banking system.

The EU banking system is very sensitive to negative rates and, if the ECB were to have cut rates by too much, it could have created systemic stress. The market was expecting cuts of around 12-14bps and so the 10bp cut in the deposit rate was slightly easier on the banks than anticipated. More importantly, all the other measures announced were supportive of banking profitability.

Read full article:

Important Information

Investment risks

This fund may have a high volatility rating and past performance is not a guide to future performance. 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. References to specific sectors are for illustration purposes only and should not be taken as a solicitation to buy or sell these securities. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only.

Auto-enrolment: tips for employers

The Pensions Regulator (TPR) has released advice on communications for employers, including three tips to help you with your auto-enrolment duties.

1. Allow enough time to select your pension scheme
It’s recommended that you start to prepare for auto-enrolment at least 12 months in advance of your staging date; additionally, give yourself time to choose the right pension provider.

2. TPR can help you get relevant information on your duties
TPR offers the Duties Checker system, so you’re aware of exactly what is required to comply. Ensure that your contact information is up-to-date and correct.

3. Using an adviser? You must agree who is doing what

Don’t risk penalties; advisers need to be clear about what services they offer, and you both should be clear about who is completing each auto-enrolment task and by when. Have an agreement in place, setting out clearly who will do what.

TPR Case study

The Pension Regulator has recently fined a company £10,000 for failing to complete a declaration of compliance and inform them that it hadn’t started automatic enrolment, even though it had engaged a financial adviser. It was only once the adviser contacted the regulator and put in place a scheme within four days, that the daily fine of £2,500 stopped. The regulator said the fines – along with payment of arrears and staff contributions of around £15,000 – could have been avoided had the employer complied on time. They failed to comply within the 60-day deadline and were given a further £400 fine, with 28 days to comply.

Don’t get caught out

If you’re not yet up-to-speed on auto enrolment, register now for your place at one of our auto-enrolment seminars.

Delivered by our pension experts, these sessions provide an introduction to the process and what your business needs to do to prepare. They also provide an overview of our solutions – helping your business to manage your auto-enrolment responsibilities.

Next seminars:

• Breakfast session – 08:30am – 10:00am Tuesday 26th April, Bromsgrove, B60 3AL


• Lunchtime session – 12:30pm – 14:00pm Tuesday 26th April, Bromsgrove, B60 3AL

Profile: OMGI chief Richard Buxton on his ‘addiction’ to markets

Richard Buxton gives the impression of someone who is not afraid to speak out when things go wrong. The Old Mutual Global Investors chief executive has just completed a roadshow for his £2.2bn UK Alpha fund at a time when many other managers would struggle to stay positive on the financial landscape.

“It’s very important to be out and about, especially when the market is down. It is important not to hide,” he says.

Buxton is one of the few household name “star” managers in the UK fund industry, although it is not a title he likes. “You are always challenging your beliefs and your level of confidence in investment views but you have to know that you won’t get everything right all the time and you have to deal with that. In this job, you can get things wrong a third of the time but I don’t wake up at night and worry.

“The great thing is that you are always learning, which keeps you interested. There’s always something new in markets; something different.”

Back in university, where Buxton majored in English, his ideas on the future were not as clear and reassuring as his investment views today. “I was a bit envious of the people who knew what they wanted. After university, I went for a job interview in the City as I was fascinated by the stockmarket bits I had studied in my A levels in politics and economics. I ended up with a job offer at Brown Shipley, which at the time was a commercial bank, and I worked on its investment side.

“I learned on the job and got addicted to markets and companies. It is a privileged job to look after other people’s savings.”

In June 2013, Buxton’s move from Schroders to become OMGI head of UK equities made headlines in the investment world. He was promoted to chief executive in August 2015 to replace Julian Ide.

At Schroders he managed the UK Alpha Plus fund since its launch in 2002. Prior to life there Buxton ran the Barings UK Growth, Equity Income and Global Growth funds for a decade.

The OMGI UK Alpha fund is co-managed by Buxton, Ed Meier and Errol Francis, who both joined him from Schroders. During my meeting with the trio, Meier and Francis rush to see a client in the opposite room. But Buxton is free to spend another hour-and-a-half with me.

“People look at the glass half empty rather than half full. That is why you are seeing this sharp sell-off”

“I don’t need to be there. They’ll come out of that meeting and we’ll know the key points to discuss. I can be out of the office when news breaks and they would quickly decide how to act in terms of the portfolio. They don’t need to ring me up and ask for permission. I trust what they do and that is very special. I have known Errol for over 20 years working together and we live in the same road.”

While “sticking to your people” is his mantra, Buxton admits it was a complete surprise to be asked to head up OMGI. Saying that, he repeats a few times throughout our meeting that there are “really eight of us running the firm”.

“It is a very collegiate business. For me the most important thing I have learned from meeting so many chief executives is having a great team around you and maintaining the culture is important. And that is palpable. We don’t want egos and politics.”

After six months in the role of chief executive, Buxton is focusing on investing in the business infrastructure and modernising the investment platform, as well as looking at new investment capabilities and asset classes.

“There is still a lot of demand for liquid alternatives so we’d like to do more there. Our Global Equity Absolute fund has been hugely successful so we want to do more on that systematic and style premia-type of product. European long/short is something we don’t have, so we are adding that capability too.”

When it comes to investment markets more specifically, Buxton recognises there is no euphoria at the moment.

“People look at the glass half empty rather than half full. That is why you are seeing this sharp sell-off. It is like a game of snakes and ladders. At the moment, all the ladders are very short and the snakes are really long, so you can grind upwards and then go down very slowly. That tells you there is still a lot of negative sentiment post-crisis so markets react very quickly on the downside.”

He also agrees the current markets situation has no precedents.

“The post-2008 world is very different. There are a number of things we’ve never seen before: interest rates not rising and bond yields as low as they are, which I don’t think is helpful anymore. In fact, it is now counterproductive because it undermines confidence in the financial system if you crash bond yields.”

However, he says the world does not need more aggressive stimulus and companies are in a much better place than five or six years ago.

Buxton always knew it was going to be a multi-year process to see a change, and he says that would be the same if the UK votes to leave the European Union.

“There is no precedent for a country leaving Europe, so there is no blueprint for how it will work. There will be extraordinary uncertainty, and it could well take years to leave.

“Sterling is clearly already weaker and that will not be helpful for many companies. In the short term this will not be good for investments in the UK. Everything will be put on hold not in a dissimilar way from the last year’s elections. I am not changing anything in the portfolio as a result of the referendum, although that is not to say we won’t think about a potential impact.”

Banks report 25% rise in mortgage approvals

Banks approved 25.5 per cent more loans in February than they did a year earlier, according to the British Bankers’ Association.

The six high-street banking groups approved 79,428 loans last month, up from 63,248 a year ago.

Purchase approvals were up 20 per cent year-on-year to 45,892, while remortgage approvals rose 31 per cent to 25,073 over the same period. Approvals for other purposes grew 43.9 per cent to 8,463.

Gross lending rose 33.3 per cent year-on-year to £13.2bn, although it was down 1.5 per cent on January’s figure.

BBA chief economist Richard Woolhouse says: “Mortgage borrowing remained buoyant in February. It appears that borrowers are continuing to try to get ahead of the increases in stamp duty for buy-to-let and second home buyers scheduled to come into effect next month.”

SPF Private Clients chief executive Mark Harris says: “The BBA figures reflect the CML data for the same period with the mortgage market relatively buoyant. We expect this situation to continue in coming months with the mortgage market continuing to tick over.

“There are potential hiccups on the horizon which may foster some uncertainty, such as the EU referendum, but for many people life will go on and it will be business as usual. The challenger banks are keen to lend, while more established lenders also wish to bring in more business, which will be reflected in cheap rates and some tweaking of criteria.

“On the buy-to-let side, lenders will need to adapt to lending to limited companies as it looks as though an increasing number of investors will go down this route. Affordability constraints will continue to be an issue for some borrowers.”

Lee Robertson: MAS should have been reformed, not abolished

Last week’s Budget contained some big news for advisers, not least the announcement of the demise of the Money Advice Service. After six controversy-filled but rather self-congratulatory years it appears MAS is to be retired by the Chancellor.

Those six years have seen runaway spending of over a third of a billion pounds, which beggars belief really. Then there was its masquerading under the advice label when only offering guidance, the infamous comments about adviser ethics and the following non-apologies wrapped in weasel words about misrepresentation and journalists quoting out of context.

So it is safe to say MAS will not be missed by the adviser community. A community that was never consulted on its creation or on the amount of the levy we had to stump up while being publicly insulted by them and having to see those appalling TV ads that made no mention of who was footing the bill. I guess in hindsight we are rather glad to have not been tainted by the sheer awfulness of it as a failing organisation.

But I wonder if it should have been saved. It was finally beginning to realise it was on borrowed time. It had been subject to a comprehensive but entirely necessary review that detailed lots of changes it was in the process of adopting. It had finally  – if rather belatedly – realised self-aggrandisement and vanity brand building on someone else’s bankroll was probably not the way forward.

“Do not take the easy, almost cowardly way out. Stop shutting things down just for convenience”

Instead of shutting it down, then reincarnating it in some form and letting it run on and on, reform under a carefully managed and measured timescale might have been the better, more cost-effective option.

This constant shutting down of quango-type organisations – usually after a costly review and report by some notable worthy picked from within exactly the same part of the establishment that sets up these bodies – costs a huge amount money.

The public or the industry concerned has no choice but to continually stump up their cash through taxes or levies (which are just taxes by another name) to fund organisation after organisation on some ridiculous governmental civil service led idea merry-go-round.

How about taking a leaf out of the book of those successful advisers who have built their business without external and never-ending funding? Learn something from those who were happily maligned by MAS by sticking with it, learning from mistakes, moving forward and making sure it is fit for purpose?

Do not just take the easy, almost cowardly way out. Stop shutting things down just for convenience or out of some civil service perceived sense of embarrassment. Instead, give the organisation some firm operating principles with measurable metrics, strict funding parameters and the time to get going and learn. Insist it is at least listening to its stakeholders and those already operating in the sector. Too much to ask? Probably. But I guess we can continue to live in hope.

Lee Robertson is chief executive of Investment Quorum

Sesame Bankhall to launch new directly authorised service

Sesame Bankhall is to launch a new service for directly authorised advice firms joining the group, Money Marketing can reveal.

Bankhall Pathway will go live in the coming weeks and will work in partnership with Distribution Technology on investments and professional indemnity broker Howden. It will also use Intelliflo’s business management system Intelligent Office.

In October Money Marketing revealed the group was trying to exit a 10-year contract with Iress that saw it promote the provider through Sesame, the group’s network that has now closed for investment advisers.

A new head of client proposition for Bankhall will start work on 1 May but the firm would not give a name.

Existing tiered support services have also been rebranded as Bankhall Assist, Bankhall Orbit and Bankhall Signature.

Following the decision to stop offering investment advice through Sesame, member firms had a July 2015 deadline to leave the network, become directly authorised as part of Bankhall, or move to network partner Intrinsic.

Sesame Bankhall managing director Stephen Gazard says: “We’ve been looking at the propositions we offer and been through a full client segmentation process over the last two months.

“The new Pathway service has been driven by the appointed representative to directly authorised transition from Sesame and other network members. Those joining us sometimes have nothing and this is our solution.”

Advisers will have access to fact finding, risk profiling, research and PI insurance and will qualify for discounts on other services.

Cofunds cuts another 30 roles

Legal & General-owned platform Cofunds has shed 30 employees hired ahead of the sunset clause on fund management legacy payments.

The 30 staff made redundant were in the IT and change division and come in addition to the loss of 10 roles, reported in January, cut as part of the closure of the Cofunds’ London office.

As part of the relocation of all Cofunds roles to the Witham office, head of marketing Stephen Wynne-Jones is stepping down. His departure date has not been set.

The platform was up for sale but, as revealed by Money Marketing, a deal with AJ Bell fell through in September 2015.

Legal & General results published last week show Cofunds’ inflows fell by £1.9bn to £3.5bn over 2015. At the end of 2015 assets under administration totalled £77bn.

In February 2016 Money Marketing reported Aegon and Capita were still in talks with L&G over a sale.

A Cofunds spokesman says: “Having increased our IT and change capacity in order to deliver the developments required for Sunset and other regulatory change, we’ve recently reshaped the team to better reflect the resources we need now and into the future.

“A number of new roles have been created as part of this review, but regrettably approximately 30 have been made redundant.”

FOS reveals £1.2m levy increase; case fees frozen

The Financial Ombudsman Service industry levy will increase of £1.2m for 2016/17, while case fees remain frozen at £550 for the fourth year in a row.

The FOS levy will climb from £23.3m to £24.5m, while its planned operating budget will also increase from £223.2m to £226.5m

The FOS linked the increase levy to the transfer of responsibility for consumer credit, which now comes under the remit of the FCA rather than the Office of Fair Trading.

As a result, an increased number of firms will pay the levy, although the sums levied on individual firms are expected to remain the same.

The total number of consumer enquiries faced by the FOS in 2016/17 is expected to remain broadly flat at 1.7 million, with 15,000 forecast to be generated by investments and pensions.

It adds that it expects the number of complaints generated by the pension freedoms to remain broadly flat, having only witnessed a “relatively small” total relating to delays and administrative problems on the part of pension providers, as well as issues around getting advice.

Unlocking the power of early intervention

When someone in your company goes off on long-term sick, a thought might pop into the line manager’s head of ‘was there anything I could’ve done?’ Every employee’s situation is different and for many reasons, there may have been nothing an employer could have said or done to prevent sickness absence.

But did you know that where early intervention services are in place, they reduce the length of time someone’s off sick by 17% (or 18% when it comes to mental health). And by investing in training and development for HR and line managers, it could help to spot the signs of a staff member struggling, before a problem gets worse.

Desk ergonomics also play a big part in preventing muscular skeletal disorders. An 8-hour day mostly spent sitting at a desk can exacerbate existing conditions, so the office set up shouldn’t be a health-hazard.

Employees are a company’s most important asset, so find out the best way to support them with our Benefits of Early Intervention report.

Phoenix weighing Abbey Life bid

Closed-book provider Phoenix is weighing a bid for troubled rival Abbey Life, Sky News reports.

Phoenix has hired bankers to advise on a bid for the business, which is owned by Deutsche Bank.

Sky News reports that Deutsche has begin seeking buyers for the business in the last few weeks as part of a drive to strengthen its balance sheet.

Abbey Life includes books of business from companies including London and Edinburgh Life, Excess Life, Target Life and Hill Samuel Life.

The news comes just two weeks after Abbey Life was one of the firms revealed to be facing FCA enforcement following the regulator’s long-awaited closed-book review.

Govt to review house buying process

The Government is set to investigate ways to improve the house buying process.

In today’s Budget document the Treasury claimed consumers spend £270m each year on failed housing transactions.

When a transaction falls through buyers normally end up losing their legal, survey and mortgage fees.

It said: “The Government will shortly publish a call for evidence on how to make the process better value for money and more consumer-friendly.”

A Building Societies Association spokeswoman says: “We look forward to the publication by Government of a call for evidence on how to improve the home buying process and will engage.”

SFO drops foreign exchange investigation due to ‘lack of evidence’

The Serious Fraud Office has closed its criminal investigation into foreign exchange market fraud due to “insufficient evidence”.

Following a referral from the FCA, the SFO sbegan investigating “fraudulent conduct” in the Forex market July 2014. The investigation was carried out over one and a half years and covered over half a million documents.

However, in a statement issued today SFO says: “Whilst there were reasonable grounds to suspect the commission of offences involving serious or complex fraud, a detailed review of the available evidence led us to the conclusion that the alleged conduct, even if proven and taken at its highest, would not meet the evidential test required to mount a prosecution for an offence contrary to English law.”

The SFO says it will continue to liaise with the US Department of Justice in relation to its ongoing investigation.

In November 2014, the FCA fined five banks – HSBC, JPMorgan Chase, Royal Bank of Scotland, UBS and Citi – a total of £1.1bn for failing to control business practices in their foreign exchange trading operations.

Adviser hit out at Govt and FCA over FAMR proposals

Advisers say the FCA and Government have missed an opportunity to make truly radical changes in their joint review of the advice market.

Earlier today the long-awaited Financial Advice Market Review was published with recommendations including amending the definition of advice and allowing consumers to access their pension pot early to pay for the cost of advice.

But advisers have been left disappointed.

Informed Choice executive director Nick Bamford says: “Does this change anything? Changing the definition of advice, maybe reviewing how the FSCS works and using your pension to pay for your advice. Am I missing something?

“Everytime there’s a chance to do something radical and really shake up how people do things it is missed. We want something radical, this is a consultation basically saying nothing.

“The bit that really irritates me is they say they are reviewing the FSCS but we are going to get our levies and we’ll be paying tens of thousands and I bet we’ll still be having this conversation in March 2017.”

In addition, the FAMR flatly rejected the idea of a fixed or variable long-stop after finding “relatively few complaints” relate to advice given 15 years ago.

Rowley Turton director Scott Gallacher says: “I consider this somewhat twisted as by the same logic the FCA are saying that if advisers only had a higher number of complaints over 15 years old then they would have considered the long stop appropriate. It’s the classic Catch 22 that we always seem to be in.

“The additional part of the FCA’s argument against the long stop for IFAs is the long-term nature of some financial products, but are these any more long term than other professional services such as wills, medical, or even architecture?”

One of the headline recommendations is expanding the current model of adviser charging that restricts money taken out of a pension pot being used for advice on broader areas.

But Wingate Financial Planning director Alistair Cunningham thinks this leaves the system open to abuse.

He says: “I like the way the system works presently because it is less open to abuse. If I tell a client don’t worry I’ll take the fee for this bit of work out of your pension over here that doesn’t feel right. It removes the link between the advice you are giving and the fees you are charging.

“I have no issue with the current model of adviser charging where each pot picks up its own tab.”

Highclere Financial Services senior partner Alan Lakey adds the regulator’s focus is wrong.

He says: “The most obvious thing that FAMR misses is that they still don’t get the fact that the more people advisers talk to, the more products are purchased.

“And the more advisers are able to speak to clients rather than dealing with paperwork the better. But it’s the horrible compliance and regulation aspects that inhibit us, and this does nothing to address that.”

RBS culls face-to-face advice; axes 550 jobs

RBS is to drastically slash its face-to-face advice services, leading to around 550 job cuts, Money Marketing can reveal.

The bank confirms 221 specialist advice roles will be axed, leaving face-to-face investment advice only available to customers with £250,000 or more of assets.

In addition, 195 face-to-face protection advisers are due to be scrapped. As a result protection advice will only be given over the phone from Edinburgh.

As a consequence protection and investment advice will no longer be delivered in Bristol.

Other roles due to be axed include support and quality control staff. In all around 550 RBS advice staff will be impacted. In addition, 38 jobs are under threat as part of a broader restructuring within the branch and private banking divisions.

Unite the union is in negotiations with RBS over the proposed job cuts.

An RBS spokesman says: “We want to help as many customers as possible invest their money in the right way for them. The demand for face-to-face investment advice is changing. Our customers increasingly want to bank with us using digital technology.

“As a result, we are scaling back our face-to-face advisers and significantly investing in an online investing platform that enables us to help a new group of customers with as little as £500 to invest.”

On protection, he adds: “Due to the gradual decline in the number of customers in our protection business, this service will now be available over the telephone.

“We will move to this new service on 11 March and will proactively contact all customers to ensure a smooth transition.”

Unite regional officer Lyn Turner says: “Ending face to face services within branches loses an important personal connection between customers and the bank. This jeopardises the bank’s ‘social licence’, the public goodwill RBS rely on to operate.

”Unite puts the job security and wellbeing of our members first. We are demanding that the bank offer genuine opportunities for redeployment and alternative work to anyone who is impacted by these announcements.”

Martin Tilley: The high cost of Sipp commercial property transfers

Collection of data for the purpose of management information is key to a well-run business, and looking for trends can help allocate resources to meet demand. Monitoring not only numbers of new cases but investments being made, sources of business and so on, can help identify these trends.

One that has become increasingly strong lately is the proportion of new cases coming to us that have listed direct commercial property as their first/primary investment. Data collected for the first two months of this year shows, of all new Sipps established with us, 54 per cent were for this purpose. This follows three consecutive calendar years where the percentage varied between 45 per cent and 48 per cent.

Although in the majority, not all these cases were acquiring a new property. An increasing number are cases transferred from other Sipp providers where existing property is held.

Some intermediaries have cited reasons such as service and fees as contributory factors to this, while others have quoted a change in terms or proposition. This is perhaps not to be unexpected following on from the FCA’s thematic review of Sipp providers and the revision to Sipp operators’ capital adequacy requirements, which, now finalised, becomes effective from September. Past and continuing consolidation in the Sipp market might also reflect on propositions.

However, feedback from some advisers is that the process to transfer across a directly owned commercial property case can be complicated and expensive.

Unlike a SSAS, where on change of professional trustee the property remains in the same trust and is simply re-registered, with a Sipp the property (and other assets) must be lifted from one provider and transferred to the Sipp of another. This is because each Sipp is integral to, and entwined with, the original operator. The good news is that, although the property must be moved from one Sipp to another, provided it remains held for the same underlying beneficiary, no stamp duty land tax should apply.

This does mean, however, the new provider will be accepting the new property into its own Sipp book of assets and, as mentioned, the FCA’s requirements are such that, while a Sipp operator should not be responsible for assessing and commenting on the soundness of the property investment, it should take responsibility for each asset it accepts with regard to it being in the interests of the client to hold it.

For this reason, the new Sipp provider will want to undertake its own due diligence on the property: a process not unlike acquiring the property anew. Just because the property has been accepted by one Sipp operator does not mean it will be accepted as an asset by another.

For example, some providers will not entertain overseas properties, those that have a current tenancy void, rent arrears or a short leasehold remaining, or those that require borrowing or outright ownership rather than a joint ownership basis. Different approaches are also taken by some with regard to property development.

The new Sipp provider may also require the usual property searches to be undertaken, particularly if those previously done were several years ago. Checks on environmental issues and the existence of asbestos management plans will also be necessary. Another check becoming more important is that for an Energy Performance Certificate, as properties falling into the lower efficiency bands may, from 2018, become difficult or impossible to market unless improvements are made.

These barriers are not to say the transfer of a property from one Sipp to another is not a worthwhile consideration. Some providers are simply more geared to commercial property acquisition and administration than others, so features such as service and administration may simply fit better with individual clients. The packaged offerings where all administrative functions are carried out and under the control of the Sipp operator may suit those who are busy running their business and do not have time to do it themselves. For these clients a fee premium might be payable.

For others, the ability to select their own solicitors, valuers and property managers, or indeed self-manage their properties, will mean the resources of the Sipp operator will be less used and thus the fees payable might also be less. An often-overlooked feature is the ability to arrange the property’s insurance, savings on which from the operator’s blanket policy can sometimes make the costs associated to transfer insignificant.

 Martin Tilley is director of technical services at Dentons Pension Management

Government-backed review finds NI rules ‘not fit for purpose’

A major consultation on the alignment of income tax and national insurance contributions has found the latter system is “no longer fit for purpose” and may herald the announcement of an overhaul at next week’s Budget.

The Office for Tax Simplification paper, published this week after being first launched by Chancellor George Osborne last July, does not go as far as calling for a unification of the two taxes, instead focusing on a redrafting of NI rules.

OTS figures show that under the current regime, self-employed workers earning £65,000 would be £3,000 better-off than an employed person on the same salary.

The OTS says: “The key change in many ways is to improve transparency around NICs in particular: that greater transparency will encourage taxpayers to understand the contributory system and make informed choices.

“Together these changes will remove distortions and make the system more equitable – a key desire across all our stakeholders – more understandable and hence simpler.”

Proposals from the OTS include basing employer NI bills on “whole payroll costs” to create a simplified system, with a new tax set at 10 per cent, rather than the current level of 13.8 per cent.

Helm Godfrey chairman Danby Bloch says the proposal could further turn up the pressure on salary sacrifice arrangements.

He says: “This paper could be taking us towards the Chancellor taking a real look at salary sacrifice.”

Old Mutual Wealth pensions technical expert Jon Greer adds: “With major changes to pension tax relief put on hold, we anticipate there is scope for George Osborne to give the green light for an overhaul of national insurance at next week’s Budget.

“This would be a major and long-term undertaking, requiring huge changes to HMRC’s processes, employers’ payroll systems and legislative structures, which would have a dramatic impact on tax, benefits and pay.”

Tony Wickenden: Casting the anti-tax avoidance net wider

The recently published disclosure of tax avoidance schemes regulations (The Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) (Amendment) Regulations 2016) give us the new hallmarks for arrangements involving standardised tax products and loss schemes, as well as an update on the planned next steps for inheritance tax schemes.

Broadly speaking, the new regulations seek to expand the reach of Dotas. The main sector interest is in relation to IHT but the proposed expansion of the hallmarks to cover a wider range of schemes in this area will be consulted on further later this year.

It is encouraging the Treasury is looking for the expansion to be tightly targeted so it does not catch ordinary, non-abusive tax plans. The draft regulations made a reasonable stab at achieving this objective by excluding loan trusts and discounted gift trusts. However, some rewording was clearly necessary, as was further reassurance in relation to other, arguably even more straightforward, IHT planning strategies.

At this point, I thought it would be worth revisiting the key aims of Dotas and the motivation behind widening its reach. The regime serves two main purposes:

1: Early warning system

To help HM Revenue and Customs identify cases and schemes that need to be investigated and challenged. In other words, it acts as a kind of early warning system. The responsibility to provide the required information (with “supplementary” financial penalties for not complying) falls on the scheme promoters.

Having registered a scheme, a reference number will be issued and all users of the scheme should include this on their tax return so HMRC can readily identify it. There was some evidence in its early stages that having a Dotas reference number (a prerequisite to promotion of schemes within the hallmarks) was considered (presented even) as some form of HMRC approval. Bizarre.

More recently there has been evidence of activity among promoters focused on creating schemes that ostensibly fell outside the need to be disclosed under Dotas: for example, because a scheme was similar to one being promoted before the hallmarks were introduced or just fell outside of the (possibly too narrowly drawn) hallmarks as they stood. One would always counsel caution over such schemes.

The primary test for consideration of adoption should be whether the arrangement proposed would achieve its aim within the relevant legislation as it stands. When considering what “as it stands” means, you should bear in mind how the courts and tribunals are increasingly taking a “purposive” approach to interpreting legislation as opposed to a strictly “formal” one.

Add to this the existence of the general anti-abuse rule and you have a fairly powerful case for a scheme having to be within what Parliament intended if it is to be successful these days.

Promotion of a scheme on the basis it does not need to be disclosed under Dotas would seem worrying, especially if there is some doubt over whether the central tax-saving purpose would be achieved anyway. Not having to disclose under Dotas may also be promoted as avoiding the chance of receiving an accelerated payments notice.

2: Tax cashflow

That brings me on to the second purpose and motivation for widening the reach of the regime. Having a properly issued Dotas reference number can lead to the issue of an APN.

Tax cashflow is extremely important to HMRC and the ability to issue APNs to individuals with Dotas schemes (and partner payment notices to partnerships) enables it to address one of the key contentions in relation to “aggressive” schemes. This is that, while the effectiveness of a tax avoidance scheme with a Dotas number is being determined by the tribunal or courts, the outstanding tax under dispute ought to rest with the authorities rather than the taxpayer.

Naturally, on the basis the taxpayer won their case, the tax collected via the APN would be returned with interest. Unsurprisingly, however, HMRC seems relatively confident few such returns will need to be made.

So that is the Dotas regime for you. Hardly surprising, then, that we are seeing moves being made to expand its reach.

Tony Wickenden is joint managing director at Technical Connection

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The introduction of pension freedoms has changed the nature of retirement advice.

Challenging the status quo bias on platform selection

Advisers did not naturally gravitate towards platforms when they first came out. Letting go of paper was harder then than it is today. In fact, they only began to grow in popularity when they became the main way for clients to purchase straightforward savings products such as Isas.

While platforms have since become the out and out first choice for advisers – with more than 90 per cent of new Isa funds invested via them – the fact remains, for many, their use came about by accident rather than intention or desire.

As a result, selecting which platform to use did not always receive the proper focus it should. And while selection processes are now more rigorous, the FCA clearly thinks there is more work to be done.

Last month, the regulator set out its latest thinking on the subject in Accessing Suitability: Research and Due Diligence of Products and Services, published under TR16/1. While it is one of the shortest papers I have ever seen from the regulator, a theme weaved throughout: platforms should not be considered for life.

The paper is wrapped around a phrase we are likely to hear a lot more of – status quo bias. This emphasises the need for advisers to carry out ongoing research to ensure the platforms they have selected remain fit for their intended purpose, recognising that what clients need and want will have changed over time (think pension freedoms).

The upshot of this for advisers is they are likely to face even greater scrutiny from the regulator over whether or not the platforms they use to deliver their services and investment propositions provide the best possible outcomes for clients.

In an ideal world advisers would conduct detailed checks in advance of investing client money on platforms but, as I alluded to earlier, this has not always been the case.

Following this latest shot across the bows from the regulator now is a good time for advisers to review their stable of platforms. I am sure clients will not be surprised if there is a move.

Thankfully, for the majority of adviser-led platforms, there are no exit penalties applied to  client assets, meaning advisers are free to consider one over another.

So what must you do when a platform falls short of requirements? Well, one thing is for sure: letting clients hold their money on out-dated platforms is not the answer.

Perhaps it is not an emergency today but accumulating a number on so-called zombie platforms  does not seem a sensible position for anyone. Never more so than when it is plain to see the platform no longer serves its intended purpose.

How advisers ensure due diligence on their existing platform is robust is a matter for them. However, a statement on a client’s record that reflects on legislative changes, demonstrates a review of the platform market has been carried out and perhaps gives reasons why the current choice remains the best home for their money would seem like strong due diligence to me. No status quo bias or predisposed favouritism.

But recognising when a change is needed is one thing; doing something about it is another. It is not as straightforward as it needs to be to switch platforms but if the needs of the client are better served by investing elsewhere it has got to be done.

Challenging the status quo drives progress and judging by the FCA’s latest paper it is going to be an area of continued interest. So challenge yourself and your platforms. How can a platform  help you deliver the services you and your clients want?

If we do not question the ongoing suitability of platforms and their (our) processes, clients will not get the best out of us. So more research and due diligence is needed.

Dig deeper to challenge and understand the platforms you use and then take action. You will find platforms are not the plain vanilla some would have you believe.

Alistair Wilson is head of retail platform strategy at Zurich UK Life

Brexit and the mid cap buying opportunities

Video update from Mark Martin, Head of UK Equities, Neptune Investment Management

With the Brexit referendum scheduled for 23 June, how much risk is priced into the market and is the current volatility a long-term buying opportunity?

Watch Mark Martin, Head of UK Equities, and Holly Cassell, Assistant Manager on the UK Mid Cap and UK Opportunities funds, discuss sterling weakness, the potential impact of Brexit on London property valuations and why, in recent years, large caps have not been the safe havens they are typically perceived to be.

In the video, Mark and Holly discuss:

• Neptune’s central expectation that a risk-averse UK electorate will not vote for Britain to leave the EU


• How they believe ‘Brexit risk’ to be already priced into the market


• Sterling weakness and the potential for M&A activity


• FTSE 250 stocks added to the Neptune UK Mid Cap and UK Opportunities funds

Click here to watch the Video

Important Information: Investment risks

Neptune funds may have a high historic volatility rating and past performance is not a guide for future performance. The value of an investment and any income from it can fall as well as rise and you may not get back the amount originally invested. References to specific securities are for illustration purposes only and should not be taken as a solicitation to buy or sell these securities. Forecasts and past performance are not a guide to future performance. These are Neptune’s views and as such this document is deemed to be impartial research. Any forecasts, projections or targets are to provide you with an indication only and should not be relied upon. 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 article 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 prospectuses for further details.

Treasury mandarins admit claims management clampdown regrets

Two of the Treasury’s most senior civil servants have admitted the Government should have moved faster to clamp down on claims management companies.

The National Audit Office reported last week that CMCs had gained up to £5bn from claims handled by the Financial Ombudsman Service.

Regulation of CMCs is currently handled by the Claims Management Regulator which operates under the Ministry of Justice, although a review is in process to examine the future of regulation of the sector, including whether charges should be capped.

And at a hearing of the Public Accounts Committee yesterday, MPs questioned whether the Government could have moved earlier to prevent money being siphoned off by CMCs.

HM Treasury director general Charles Roxburgh, described the comments from MPs as “a good challenge”, while second permanent secretary John Kingman admitted: “With the benefit of hindsight it is clearly the case that the work we are doing now, no doubt it would have been better if we had acted sooner.”

Labour MP and committee member Chris Evans accused the Government and the FCA of “fiddling while Rome burns”, in particular relation to misselling in the aftermath of the pension freedoms.

However, acting FCA chief executive Tracey McDermott said the regulator had carried out a significant amount of work to prevent pension savers being ripped off.

She said: “The most immediate things that we have done were in the short term. When the freedoms came in we introduced new rules requiring firms to give what we call retirement risk warnings, which cover things like issues around health, around scams, around dependents, around tax and so on.

“We have been very focused, and indeed the industry is very focused on the fact that this cannot become another misselling scandal.”

However, McDermott warned shifting regulatory focus to products, rather than individuals, risks stifling the market.

She said: “That would be a massive shift of emphasis for the organisation and it would be something that parliamentarians would want to debate. There is a real downside risk of pre-approving, in that you actually quell innovation.”