Learning the language of risk

I recently spent a couple of days with one of our PR clients, Paul Resnik from FinaMetrica. For those who don’t know FinaMetrica, they specialise in helping financial advisers and their clients understand investment risk tolerance through tools and educational material.

One of the things we discussed was the language of risk and the fact there was a good deal of misunderstanding out there which was potentially having a detrimental effect on client outcomes.

First. Let’s get one thing out of the way. Paul hasn’t asked me to do this blog. I’m doing it because I genuinely find this stuff interesting and I enjoy reading all sorts of views on risk issues. I’m fully aware some of you reading this will think otherwise, but there it is.

Now, I’m a bit of a simpleton. I hopped, skipped, jumped and clicked my heels out of school at 16 to seek gainful employment. So the thought of academic journals on the science of psychometrics applied to investment risk sends me running for the hills.

However, one thing that Paul has drummed into me over the years we’ve worked together is that risk tolerance is a personality trait that is relatively stable over time. I had at first thought risk tolerance was revealed by behaviour – but I’ve been convinced otherwise.

I’ve just put this very question to twitter (yes, I appreciate the irony of testing the science of psychometrics via one of the most unscientific means imaginable). What I found didn’t surprise me really. The split of opinion was pretty much right down the middle. 48% of those who took the poll (thank you to the 69 people who took the trouble by the way) said risk tolerance is a personality trait. The other 52%, like me at first, think it’s revealed by behaviour. I’m a layman in all of this, so I’m not going to say 52% of people are wrong. But I will explain how I reached my conclusion.


If I don’t understand something – it happens a lot – I always try to break the problem down and simplify it in terms I get. This is what I did for the language of risk. The resulting story has nothing to do with investments directly, but everything to do with the psychology of risk.

Here goes.

My tolerance to public speaking (risk tolerance)
I have a very low tolerance to public speaking. In fact, I hate it. I get very nervous. I avoid it when I can. In my 25 years in financial services I’ve had to give presentations to large audiences and sit on panel debates and at times I’ve even been required to front up big news and manage crisis situations on TV and radio. Every time I’ve hated the experience. This is probably why I have ended up in PR where it’s my job to put other people in the spotlight while I skulk in the shadows. This aversion to public speaking is hard-wired into my DNA. It’s a personality trait. Yes, training and experience over the years has helped. But I’ve accepted it’s not one of my natural strengths.

Attitude to public speaking (attitude to risk)
This is pretty much the same as my tolerance, and it’s evidenced by the fact that I have, when needed, spoken in public. But I’m separating it out here only to illustrate how my thinking has developed. My attitude to public speaking is pragmatic. I know that at times I will have to do it to achieve certain goals, even though it’s way outside my comfort zone.

Requirement to speak in public (risk required)
Let’s say, just for illustrative purposes you understand, Mark Polson decides to fire me for real one of these days.

I find myself on the job market. So I go to Nicki, a recruitment consultant. I talk to Nicki and tell her about myself. I tell her my target salary is £75k a year. I also tell her about my tolerance to public speaking, and my attitude to it.

Nicki does a grand job in finding me five potential roles. At one end of the scale, there’s a job that pays £50k a year and has no requirement to speak in public. At the other end of the scale, there’s another job that pays £100k but requires me to be on my feet speaking publically the majority of the time. I now understand the public speaking requirement. I can make an informed decision.

Capacity for public speaking (risk capacity)
The job in the middle is the Goldilocks one. It pays £75k and it may be necessary for me to speak in public very occasionally. Ok, I can deal with that. If I had chosen the one at £50k I would have quickly realised it wasn’t for me when I struggled to pay the mortgage and put food on the table. Due to financial necessity I would have been back on the job market within months. If I’d taken the job at £100k I would have bailed because I’d be a nervous wreck within days.

To jog this along a bit, let’s now assume I aced the interview and landed the job that matched my requirements and capacity.

Public speaking behaviour (risk behaviour)
In my first week in the new job I find myself talking to a group of recruitment consultants. It’s a big audience and I recognise no one other than Nicki; my very own recruitment consultant who helped me land this new gig. Only she and I know that I’m hating every minute of this. To everyone else, my behaviour (the very fact I’m on my feet speaking to them) indicates that I’m comfortable doing what I’m doing. They would all be wrong. They have incorrectly assumed my behaviour is an indication of my tolerance to public speaking. It’s not. My behaviour is an indication of the compromises I’ve made along the way, including my attitude to public speaking, my requirement to speak in public and my capacity to do it.

If any one of those recruitment consultants were to assume my tolerance (my personality trait) based on my behaviour in that one moment, they’d probably end up matching me to the wrong job.

My discussion with Paul and the results of my twitter poll have convinced me there is some confusion out there on the language of risk. Perhaps creating some non-academic examples will help aid understanding.

Of course, I’m happy to present my ideas to you and your teams any time you want. I love that kind of stuff.

Weekend reading

Lots of interesting stuff over the weekend, so for those of you with a life who didn’t spend the weekend reviewing the personal finance press, here’s a quick round up.

Friday evening started with a bang (#langcatlife) with the FT front cover on pension fund transparency. Much more to come on this, building on the excellent work coming from Andy Agathangelou & the Transparency Task Force. Henry Tapper’s views on this subject are also well worth reading.

Saturday morning saw the Telegraph getting stuck into pensions, off the back of Andy Haldane’s clickbait comments the previous week. The Guardian also wrote about the complexities of pensions, and challenged the previously held “rule of thumb” of 4% withdrawals.

The Mail on Sunday broke the news of M&G reducing their charges for direct investors. This has been widely reported elsewhere in the trades this morning, and is further evidence of the price pressure that most of the industry is facing. We expect this to be a big theme over coming months, and no one is immune. We know of one firm who are about to launch a proposition for under 50bps, for advice, custody, investments, the lot. Loads of coverage in the real world press on pensions, charges, and the need to take control of your financial future. The times are a changing….

Finally, and on a lighter note, the seven unmistakable signs of a shit brand consultant. Note to anyone involved in a “robo” proposition…check the millennial point….

Have a good week

DataViz: A fresh look at financial services

If the definition of insanity is doing the same thing over and over again and expecting a different result, then financial services has gone well and truly mad. Having joined the industry around two months ago, this has been my overwhelming impression of the tired-old lines and scary figures that the industry constantly churns out for the supposed benefit of savers. I’ll continue to be brutally honest by pointing out that most ordinary people already find personal finance issues pretty damn dull, with younger generations in particular becoming increasingly disengaged when it comes to their finances. So why continue to feed them the same information over and over again when it’s clear that something that we’re doing just isn’t resonating?

Information can often be overwhelming, so it’s not surprising that many people feel turned off by this type of communication. Take the constant drone from the financial sector telling people like me (#TeamMillennial) that we’re not saving enough for retirement and that if we’re not careful we’ll be destined for a poverty stricken dotage. Yawn. I expect I’m not alone when I say this type of communication has the opposite desired effect. I just turn off. As I say, I’ve not been in the industry for long but I’m already exhausted by these lazy numbers telling me I need to save hundreds and hundreds of pounds every single month, in order to support myself when I eventually stop working. All too often, these figures are so high they feel totally irrelevant to someone my age, leaving many like me with the impression that they must have somehow been plucked out of thin air. The result? Yet another disengaged potential saver scared off by numbers that, in isolation, appear totally unachievable. It’s true that people my age may share the same priorities – saving for a deposit, wedding or starting a family –  as older generations but we also face specific challenges such as crippling student debt and hefty house deposits. The industry should be presenting financial figures in a way that actually reflects our real lives and aspirations in this way, suggesting positive alternatives and encouraging good behaviour instead of the usual scare stories, wherever possible.

How do I suggest we do this? Data Visualisation. DataViz, as it is often referred to, can communicate financial matters in a language that younger generations (actually ALL generations) can understand by presenting a much wider context in a way that is both easily digestible and engaging. Having studied maths at university, I’m one of those weird people who start to smile when handed large sets of data. So you can imagine my excitement when I was given the opportunity to attend a DataViz workshop given by David McCandless in London (@mccandelish). By applying some sort of wizardry David transforms otherwise dull information into eye-catching graphics and intuitive diagrams that tell beautifully simple stories and stand out against the influx of data we are faced with on a daily basis. For anyone who doesn’t know who he is, his work is definitely worth checking out

An example of David's work

An example of David’s work

DataViz is all about creating images to help people understand the world. A visualisation might be created for any of a range of purposes: to inform clients and help them make a decision, to raise awareness of important issues, to highlight data gaps or purely for entertainment. Whichever it is David’s workshop guided us through some steps to help us get to the end product.

So, what makes a good data visualisation? As with many things it can be easiest to start at the beginning, with a question, then develop your concept to lead to a goal or the answer. Ideally here the ideas will start to flow and we can begin to sketch our design. But, it is important to keep in mind that however good your ideas and designs might be, they are nothing without robust data to back them up.

This journey can become frustrating as your data might not want to tell the story you had originally envisaged. Or perhaps you’ll stumble across a hidden message and end up with a completely different outcome. Data visualisation has a wonderful way of leading you down one path and then suddenly revealing another direction you could take.

A common misconception is that it’s just us data geeks creating these graphics but in actual fact there was a well-balanced audience of journalists, researchers and a sprinkling of the more technical programmers at the workshop, all equally enthusiastic to harness David’s creativity. The process actually works so much better with a combination of people from different backgrounds.

Whatever happens along the way, and however you find yourself at the end visualisation, it’s hard not to get caught up in the excitement that something memorable can be created which, for financial services, could also mean the difference between engaging savers or shutting them off entirely.

Don’t believe the hype

I’m pretty sure Chuck D and Flavor Flav had other things on their mind beyond platform due diligence when they penned their 1988 classic, but hey, it’s a great record, and its central hook is certainly worth remembering at the moment.

The platform world is changing. The Axa Elevate move broke earlier this week, and it is our understanding another similar move is also about to be announced. We are also aware of at least two other bidders who lost out to Standard Life for the Elevate book, and it seems pretty clear that part of the attraction from SL’s point of view was to buy the assets simply to stop their competitors from doing so.

Standard Life have stated that they see the platform market splitting into “buyers and sellers” and whilst we don’t necessarily think the market will be that polarised (at least in the short term) there is no doubt that a large amount of platform assets are going to shift around over the coming months. Some of this is happening naturally, and the gap between net & gross flows for some platforms and the fund industry generally is pretty wide. However, the hype is still focussed on what happens if/when your platform changes ownership and the supposed need to take an almost obsessive view of a provider’s financial strength.

Every platform, irrespective of their financial strength is required to have a plan demonstrating how, if the need arose, they would wind down their business whilst still treating their customers fairly. This extends into capital adequacy provision, and the larger providers will have their plan regularly reviewed by the FCA as part of the normal close and continuous relationship. The upshot of all of this is that, if a provider decides to exit the market, one of two things will happen. They will either be acquired or they will exit. If they exit, these plans require them to treat customers fairly and ensure customers are not in any way disadvantaged by the change. The regulatory protection in this scenario is pretty strong, and especially so for larger providers.

Returning to the Axa/SL announcement, 160,000 customers have invested their hard earned via Elevate. SL quote an average case size of “£80 to £90k” so for these customers it’s a not insignificant event. However, for these customers, what exactly has changed? Their money is still invested, the charges are the same (for now at least; we’ll be watching to see what happens there), and they will still have the support of their adviser. If they pick up the phone to speak to Axa staff they will find the same people are still there, and whilst they might be nervous about their own futures, they will be delivering the same level of service as they always have done. Even if/when the merger is approved and completed, is it really anything for customers to worry about? Standard Life PLC is one of the largest companies in the UK, and whilst the detail of any migration (if indeed there is one) are still to be confirmed I find it hard to believe Standard Life will be doing anything other than treating these customers fairly.

The merger has been reported in the real world via the Telegraph, FT, City AM and others. It’s noticeable that there are no comments from customers on any of these articles, and the last mention of Axa Elevate on the Money Saving Expert forums was around 3 months ago. Early days yet, but there is no evidence of any customers being worried about the move. Those hyping up the need to move assets and/or change platforms would do well to remember this, and focus on the potential customer outcome.

And so it begins – Standard Life scarfs AXA Elevate

(I made edits to this at 7.30pm on 4/5/16 to update on the Architas deal, pricing reviews and the purchase price).

Well, I was never going to be able to let this go by.

I was on a plane as I wrote most of this; the news of Standard Life buying AXA Portfolio Services, which we all know as Elevate, broke  as I was driving to the airport, much to the chagrin of the SL corporate communications department, and so we held our analysis until today so that it could break formally. Oops.

Never mind, lads, no-one died.

So. SL scarfs Elevate. What do we make of it? In no particular order, here are my first reactions; we’ll have more in the next day or so. Check back for more FASCINATING analysis.

  • Our first thoughts today at the lang cat are about the people. Exercises like this always create lots of uncertainty for staff; there will be many worried folk driving to work today. There are some great people on both sides of this deal, and here’s hoping it falls well for them.
  • On with the show. This is an additional £9.8bn onto the SL Enormous Pile Of Cash. That takes the SLSL platform business up to close to £37bn, which we reckon makes it the biggest advised platform: Cofunds has IRO £35bn but a decent whack of that is D2C, and FundsNetwork won’t disclose its splits, so in the absence of better data we’re saying SL is now Johnny Big Balls.
  • The price isn’t public (yet) but is commonly believed to be £250m. Assuming a composite revenue of 30bps on the Elevate book, it pulls in £29.4m a year. Profit is obviously not a big story for Elevate yet. So if £250m is right, that’s nearly 9x annual revenue. Wowzers. EDIT: We were told earlier today that £250m is way too high. Various analyst notes are putting the price at around £50m – £75m. We don’t know the truth, but 
  • The deal includes a D2C platform (which is small at the moment) in AXA Self Investor. ASI is a pretty good proposition, so we’ll be interested to see what SL does with it.
  • One fact will be overlooked routinely in the analysis over the next few days. That is that the AUA isn’t Standard’s, or Elevate’s, or advisers’. It belongs to the clients. Those clients were advised to go with Elevate, rather than SL Wrap. We’d do well to remember that.
  • Suitability is a thing. Somewhere, an adviser decided that each client would be better served by a red and blue offering than a yellow and blue one (we really need Aviva to change its corporate colours, get on it lads, it’s getting confusing). As a result of that, advisers may wish to consider a fresh suitability assessment for each client.
  • SL Wrap is a very good platform – it won our top prize last year – and has enjoyed more investment than Elevate, particularly on the model portfolio side, in recent years. But that doesn’t remove the need for the process. If the process says ‘SL’ then great. But Elevate, for a time at least, was the place you went when you wanted a big provider but you didn’t like SL (and I have direct experience of that from my days there).
  • But it’s not that simple. It may not be commercial for advisers to do that review. Not that averages are a great guide, but the average per client pot on Elevate is £61k or so. Unless the client will pay a fee for the review, I’m not sure advisers can justify the exercise. I’d love to hear from Elevate advisers about what your approach will be.
  • But it’s not that simple (again). Quite a lot of money flowed to Elevate on the basis of the Architas deal. I’m agog to hear whether those deals will be honoured on SL Wrap. If not, then there will be more of those exercises going on. Lots of competing forces here. EDIT: I’m not agog any more. Architas confirms that it will extend the special deals to SL Wrap users.
  • Price will be a thing even for non-Architas users – Elevate is cheaper than SL in pretty much all situations, and while both have done plenty of strategic deals down in the 20-25bps range (not you? Shame…) Elevate has probably been more aggressive for longer. We’ll be looking carefully to see whether SL honours those deals on Elevate. EDIT: SL confirms that it will review Elevate pricing. Given that Elevate’s stepped structure makes it very effective for many clients (on a price basis anyway) this is one to watch.
  • Much will be made of the fact FNZ is the common underpinning of SL and Elevate. This should, in theory, make it easier to migrate. And so it will, compared to moving off altogether. But assets do still have to move, Elevate is a different system (with some shared architecture) to SL Wrap, and it’s a bigger job than you’d think. We reckon it’s about 30% easier, on the basis that no-one can disprove that figure and it sounds good.
  • This news and Aviva’s news the other day is obviously good news for FNZ; although of course this isn’t new asset for Adrian and the gang in the way that the Aviva deal is, it should help streamline some of their costs. The really interesting battleground, in our opinion, isn’t provider vs provider; it’s underlying tech vendor vs underlying tech vendor. Lots more on this to come.

So that’s it for now. Huge news, this. Really the first major bit of consolidation in the UK platform market, and a logical fit. As I always say at any major change, everyone involved needs to be realistic about how brutal the transition will be, and adult about communications and setting expectations. Given where AXA’s been, this is probably the right result.

Oh, and if anyone’s hiring Edinburgh-based corporate comms people, I suspect there might be one or two coming on the market soon…

PS16/12 and the mystery of the cover photos

Another week, another chunky missive from the FCA. Although happily, PS16/12: Pensions reforms – feedback on CP15/30 and final rules and guidance didn’t make me feel like turning green and smashing stuff. So that’s a good start.

PS16/12 follows on from CP15/30: Pensions reform – proposed changes to our rules and guidance. It looked at whether consumers have proper access to products and services, value for money and competitive markets. Naturally, pension freedoms, or any barriers investors might be facing to access them, featured heavily.

Not surprisingly then, PS16/12 is pretty wide-ranging. So this is more of a round-up, a collection of nuggets (chicken-free) with the potential to keep providers and advisers busy for the foreseeable. Sorry. Busier.

The bulk of the paper concentrates on three areas (the objectives of the consultation paper):

Promoting competition

There are a number of points worth a mention but too many for here. However, two themes dominate. First that investors must have ready access to all the information they need to make an informed decision. And secondly, the rules being laid down are minimum requirements. Firms can add to them as they see fit as long as whatever is being issued remains user-friendly and investors do not fall victim to information overload. And there will be no specification or prescription, so don’t ask.

Ensuring the market works well

Most respondents agree that the retirement risk warnings introduced sans consultation in February 2015 should stay, but improvements are afoot. For instance, providers can start to ask questions to identify which risk warnings should be given before the investor has decided how they will access their pension savings. Again, no specifics as firms are best placed to spot the key risks for their customers.

Protecting consumers

One worrying aspect of the pension freedoms is investors being put under pressure to use their pension savings to repay debt. Apart from the obvious it also goes against Principle 6 (treating customers fairly) and CONC 7.3.10R. So the FCA will remind firms of the existing line between the regulated activity of advising on the conversion or transfer of benefits and that of advising on investments.

Of the other areas covered, a couple stood out for me.

Non-advised annuity purchase

A curious one. There are real concerns over consumer detriment here, primarily that the commission from a non-advised annuity sale could out-strip what would have been charged for advice. Not only is this a cost to the client but there is also a risk of commission bias (yes, still). But, how much of an issue is this? Well, not as much as all that it seems. There is “limited robust quantitative evidence on the nature and extent of any possible detriment”. Further evidence is needed and that will come as part of the Retirement Outcome Review.

Insistent clients

A number of suggestions were made in response to the consultation paper that the onus for the insistent decision should be placed with the individual client. Either through something similar to the proposed MiFID II appropriateness test or by insistent clients giving up some rights to redress in the manner of certified high net worth clients.

This formed part of a much larger discussion on pension transfers which will require a great deal more work. And the regulator sees no reason why it should do all the heavy lifting: “we believe there is a responsibility upon the industry itself to consider how it can deliver on customers’ expectations” with the client’s best interests staying at the heart of things for advice. Leave that one with you then.

Some rules are effective immediately, some in six months and a few have been held back until 6 April 2017 to allow for necessary system changes and so forth. Although changes can be made in advance of these dates, which is casually mentioned once or twice throughout the paper.  Some other areas don’t lend themselves to change without further work and we’ll be keeping an eye out to see what the next steps reveal.

One question which won’t wait is why the covers of both these papers feature women looking slightly dazed while standing in retail environments. Deciding what to have for tea? Just found out when they’ll get their State Pension? We should be told.

Aviva and FNZ up a tree, R-E-PLAT-FORM-I-N-G

Just a quick few thoughts on the news from Aviva today that it plans to migrate its platform from Bravura to FNZ.

For those not intimately involved, Bravura and FNZ, along with GBST (disclosure: GBST is a client of ours) are the three big beasts of outsourced platform technology in the advised space. IFDS is coming up on the rails with its SJP and OMW implementations, and over in D2C-land JHC Figaro is pretty popular, but those three are the big names at the moment.

Aviva’s been in a funny position, with FNZ powering its nascent direct platform and Bravura (who predated FNZ in yellow-and-blue land) doing the advised stuff. After a slow start, Aviva Platform (still a terrible name) has picked up speed and is sitting in a not unadjacent space to £9bn AUA. So this is quite a big undertaking – we think it’s the second biggest replatforming exercise so far in the UK, just behind Ascentric moving £10bn to Bravura from its own Bluebutton platform. So it goes. Swings and the other things you get in playgrounds.

Actually, Aviva was going to need to replatform anyway. Its version of Bravura’s Talisman platform was due for a sort of end-of-life upgrade to the new Sonata platform. This is the journey Nucleus went through last year; and those involved will tell you that while it wasn’t as hard as changing to a completely new platform, it still wasn’t easy. Not even in the neighbourhood of easy.

So something was going to change, and it makes sense for Aviva to use just one piece of kit rather than two. The move to FNZ means that it has a clean sweep of the bigger lifeco platforms, with Aviva, AXA, Standard Life and Zurich all using that kit. Along with its other accounts, we reckon c. £60bn of UK platform assets (in today’s money) will sit on FNZ’s estate by the time this is done.

As an aside, Bravura is up for sale, and while this news will doubtless have been available on an NDA basis for prospective purchasers and analysts involved in considering an IPO, it’s still not great timing.

FNZ will supply administrative and custodial services, we think, to Aviva. That’s a further change away from Genpact, who used to be Citi, who used to be Scottish Friendly Admin Services (not quite as simple as that, but I’m at 360 words already and time’s a-marching). There’s a debate out there about whether there’s any virtue in having admin done in the same place as tech; FNZ will say it’s better, Bravura and GBST will say it’s not such a big deal. You pays your money (quite a lot in this case; Aviva says it’s ‘low tens of millions’ but it’s a long way into its FNZ spend journey already) and you takes your choice.

This will be the first advised replatforming onto FNZ that we’re aware of; everyone else has built from the ground up (SL, AXA, Zurich), or is a first-time platform tech user (Santander, Hornbuckle). So this will be a great test which those of us interested in the space will be watching very closely.

As I’m fond of saying, there is no recorded instance of a replatforming going well. It’s always a schlep. I notice that Aviva is saying that advisers won’t see any difference in the web screens they use – this is a dangerous game. I’ve seen a number of platform developments skid out of control on the basis of changing the user interface. I hope and trust both Aviva and FNZ are all over this already, but that’s definitely a potential pinch point. Quite pleased with that bit of alliteration there.

There is one certainty in this – that stellar communication from Aviva to its supporting advisers is crucial. ‘Don’t worry, ‘appen, it’ll be grand’ is not a sentence anyone should be hearing from our Yorkshire friends. Advisers need to know what’s going on, when, and if there are any bumps along the way then keeping schtum in case someone tells the papers is not helpful. Memories are long, and though Lifetime was a lifetime ago, the ghost of that particularly painful episode still stalks the halls of Welly Row. It can’t be allowed to happen again; to be fair to all at Aviva no-one knows that better than them.

If you’re an Aviva supporter, buckle up. Prepare to be forgiving, but demand transparency at all times. If you’re a competitor, think twice before pointing fingers and laughing at any problems that might occur. It might be you one day, or it might have been you in the past. Schadenfreude isn’t what we need.

Booting ISAs in the baws – tax year end 2015/16

Well now, the IA has just put out its stats for tax year end (TYE) 2015/16 and it’s not nice reading. The full release is here but this table which I nabbed from the release tells quite a story.


2014/15 was generally reckoned to be a relatively sucky year for the ISA season, which has always been a core business period for most platforms and fund managers. Indeed, even platforms who serve advisers still create ‘ISA in a box’ type campaigns. We point and laugh, but they do it anyway.

(NOTE TO SELF: PRODUCT IDEA: Schrödinger’s ISA in a box – your money exists in potentia inside a box with ‘ISA’ written on it, and you don’t get to know if it’s real or not until you open it. Disruptive or what? Some fund manager will probably buy this.)

But even 2014/15 looks like a birthday present compared to the ISA long-term savings and investments (i.e. not cash) sector in 15/16. Q1, according to the IA, saw a net outflow of £573m, and the crucial 1 March – 5 April season saw £237m net inflow, with £177m of that coming in the last 4 days of the tax year.

So there is still an ISA season, but a fraction of what it was.

I should mention here that IA stats aren’t the end of the world – its platform figures are based on just five platforms – Cofunds, Fidelity, HL, OMW and Transact. But there’s enough variation in business model there to give a reasonable degree of confidence that we’re not missing much.

So what gives? Is all the money flowing into pensions? Here’s what the IA release has to say:


For the five fund platforms that provide data to The Investment Association…net sales for March 2016 were £479 million…Personal Pensions had the highest net sales at £430 million, followed by ISAs (£314 million), Insurance Bonds (-£23 million), and Unwrapped (-£242 million)…For the same five fund platforms, funds under management as at the end of March 2016 were £200 billion, compared with £194 billion a year earlier.

Now, that’s pretty interesting. Pension freedoms are still generating higher redemptions than usual in many places, but PPs (which include SIPPs for these platforms) still booted ISAs in the baws with all the relish of…I dunno, something that has a lot of relish. A burger, maybe?

It would be hard not to think that a good chunk of that £242m that disappeared out of GIAs was recycled into pensions, presumably amidst the now-departed pensions fire sale.

So what do we learn? Advisers are pretty insensitive to ISA use-it-or-lose-it marketing; anyone doing a financial plan for someone accumulating wealth who’s wondering ‘hmmm, have my clients used their ISA allowance up?’ probably should be updating their CV. But a genuine tax relief scare is enough to get real money moving around, at least on the face of it.

Over in D2C world – remember that Cofunds, Fidelity and of course HL all have big direct books – these figures confirm what a number of D2C platform providers have been telling us – that getting new ISA investments in at the moment is like…I dunno, something that’s really difficult. German grammar?

When we’re talking about LISAs, WISAs and other new ISAs, we tend to describe them as ‘wildly popular’. Actually, the only popular ISA is a cash ISA. All these new propositions have a long way to go before they disturb the patterned behaviour of treating pensions as what they are; the most favoured mainstream tax planning vehicle.

Similarly, robos and others who think that by getting an ISA to market, they’ll participate in a glorious sort of feeding frenzy where everyone gets a share, should read these figures with a sense of foreboding.


There’s a theme running through the FCA’s Consultation Paper 16/12: Secondary Annuity Market – proposed rules and guidance. If you’ve braved all 112 pages (or any of them really) you might have spotted it. Here are some clues…

Paragraph 1.7 “We believe that there is a significant risk of poor outcomes for consumers in the secondary annuity market.”

Paragraph 1.10 “The Government’s consultation response acknowledges that for most people retaining their annuity will be the best choice as it provides a regular guaranteed, income for life.”

Paragraph 1.11 “We recognise that a secondary market in annuities may deliver flexibility for some consumers. However, we believe consumers selling their annuity income could be exposed to significant risks”.

Positive, eh? And then we get into the detail of those risks:

  • Longevity risk – increased risk of running out of money in retirement.
  • Value for money – consumers may struggle to make an informed decision.
  • Consumer inertia – the old ‘not shopping around’ chestnut.
  • Vulnerability – reduced mental capacity, pressure to settle debts, impact on benefits.
  • Potential conflicts of interest – harking back to the bad old days but at least we can rule out commission as an issue.
  • Potential risk of frauds and scams – natch.
  • Market depth – a lack of players means a lack of price competition.

Now, it is only correct to acknowledge that protections are being put in place. To detail them would be another blog but they are all on the theme of disclosure: charges information, net values, access to guidance, the importance of both shopping around and taking advice and so forth. Which is all good but requires a degree of engagement and understanding. It may not help the vulnerable who are in the most danger of finding themselves without a source of income. There will be no additional measures to protect the vulnerable beyond a reminder of existing obligations. And it is they who are likely to make up much of the clientele. Which is a deeply uncomfortable thought.

This takes me back to when the prospect of a secondary annuity market was confirmed and the question of whether it would effectively be DOA. The feeling of the whole thing being done through gritted teeth and with caveats emitting from every pore persists. It doesn’t exactly scream enthusiasm from anyone bar a few determined politicians, some ever-resourceful scam artists and the inevitable band of claim firms who will join us once the cries of mis-selling start, if not before.

Yes, it’s good to give people who are genuinely trapped in an annuity and who, by some twist of sums would be better off out of it, the option. But how many people really fall into that category? And how many who do not and are vulnerable might find themselves making another poor decision? Specifically those who are in debt or are desperate for money, are under pressure or just not capable of making an informed decision. They deserve our care and protection, not to be turned upside down and shaken by the ankles.

The risks are not limited to annuity holders and it begs the question of how many firms will expose themselves to that extent for what may be limited gains. Which, in turn, drives one of the risks noted by the FCA – if the market does not have enough players, prices offered to annuity holders will likely be even lower.

So, a terrible idea that no-one really wants and where very few people will benefit while many more are likely to suffer. And I’m pretty *****y angry about the whole thing. But it’s happening. And the best we can hope for is that the gimlet eye of the regulator will be firmly trained on all parties.


There’s a new endangered species to add to the ever growing list. Never mind your black rhinos or your Sumatran orangutans. No, the one we need to worry about is UFPLS.

The ABI has called time on pensions jargon. It’s consulting on a new guide to pensions language which will clear away the confusing in favour of simplicity to make it all easier to understand and help consumers make more effective comparisons.

The consultation (which is open until 19 June) appears to be one of those rare occasions where everyone (ABI, industry, government and consumer groups) is cheerleading for the same team. Where something is being allowed to be a ‘good idea’ without the other team waiting in the wings ready to wind it with a vicious, and extremely well aimed, football.

And it is a good thing. As an industry we have always struggled with what should be the simple act of talking to our customers. There are those of us who love their jargon and cling to it because knowing words other people don’t makes them feel a little bit special. There’s a word for them too. However, we know very well just how hard some companies have fought over the years to be rid of it. We know this because sometimes they ask us to help them.

We’ve found ourselves reading through a lot of literature over the years. Frankly even that is jargon. No disrespect to any of our fine providers but I’ve never found myself reading a set of SIPP key features and confusing it with Jane Austen. Anyway, on a first read, it can be easy to think ‘Well this could be better’ and often things could. But it’s not always a fair fight. Many times the conversation has turned to ‘Yes, we’d like to change the wording but that’s what it’s called, isn’t it?’.

As frustrating and awkward as some of our industry language is, we are bound to use it. Consumers need consistency when comparing offerings and if one provider called it an UFPLS and another called it ‘a taxable lump sum you can have before you take out drawdown or an annuity’ then things probably wouldn’t be any better. Although I suspect that ‘new kitchen fund p.s. you’ll have to pay some tax on top’ would probably work for a good number. Consistency is one of the ABI’s priorities in the new guide and we wish them well with it.

There is one question that bothers me. How well will any of us cope in a completely jargon free environment? It has always been there. It’s familiar and reliable (except when it all changes and then we get new jargon to play with, which is fun too). Perhaps it’s not so much a question of whether we can kill off the jargon but if we will all fare better than UFPLS in the brave new world?