Well, after last week’s sojourn away from financial services and into mental health awareness it’s back to earth with a bump. Incidentally, if you haven’t had a chance to watch our special HomeGames with Paul Feeney of Quilter then you can do that here. I will remember that session for a very long time and for all the right reasons.
Our topic this week is, of course, contingent charging on DB transfers, which got taken out the back of the woodshed by a glinting-eyed FCA, wielding a rusty axe and carrying a rubble sack. Hannah Godfrey of Professional Adviser has a good write-up here and the original source text is here.
So what do we think? Most reactions I’ve heard have been either reflexive anti-regulator moonhowling, or firms who are basically fine with it. One adviser made the very good point to me that individuals who weren’t in a position to afford a non-refundable fee of a few grand were also unlikely to be in a position to deal with the risk transference from the scheme to their own SIPP. And yes, I know there are circumstances where that’s not the case, but it’s not bad for a hot take.
If we’re honest, we all know this ban has been coming for a long time: I’m stunned it’s taken this long (actually I’m not stunned in any way). It’s clear where the Stratford heavies are coming from; it’s clear that they would like this market to be considerably smaller than it currently is. And even if you hadn’t spotted that, your PI insurers have and have been upping your renewals using one of those backgammon dice to decide the multiple.
More nuanced is the new requirement to describe why your chosen destination for a DB transfer is more suitable than any workplace pension scheme of which the client is a member. That’s an interesting development – as we all know, the total cost cap for a default is 0.75% (plus transaction costs) and most schemes of any size are well under that; often sub 0.5%. So your carefully put together CIP, plus 1% a year for you, plus 0.3% for the platform and a total cost of anything from 1.7% or so up to 2.2% had better have some nitro in the tank. (do you keep nitro in a tank? I should probably have an editor to check these things).
Also interesting is section 3.1 on managing conflicts. If we open our hymnals to page 30 of PS20/06, we can read that “ongoing advice charges create a conflict of interest, as an adviser may have a strong monetary incentive to recommend one course of action over another. Over time, these charges can have a significant negative financial impact on the consumer’s transferred funds…” If we turn over to the next page, we can read that “Our view is that many consumers would not benefit from ongoing advice as their circumstances are unlikely to change significantly from year to year.”
Those who fancy themselves as industry futurologists might reasonably take this as not-too-subtle code that ongoing adviser charges are going to be an area of interest for quite some time. What price a UK equivalent of the Australian fee-for-no-service Royal Commission?
As we’ve said before; the FCA isn’t a price regulator. It just dresses up as one from time to time.
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- Sad news about the passing of Mike Wallis from MND. A fine man and gone far too soon.
- Interesting piece here from Patrick Collinson on the triple lock. And in a shameless plug, we’ll be discussing potential government economic responses to the Current Unpleasantness with John Rowland of Cicero in HomeGames later today (amongst other things) – sign up here.
- It’s hard to get people to invest just now. It’s much less hard to get them to put money in cash. Just ask Goldman Sachs, who has just shut its Marcus account to new business. Ringfencing rules kick in when you get to £25bn…
- Yowza! We gone and got AKG ratings in Platform Analyser. Premium users can now filter platforms based on their financial strength ratings. Come lookit here.
- And your music choice this week is just a lovely thing to get lost in for six minutes. Please take a moment to enjoy A Gallant Gentleman by Aussie instrumentalists We Lost The Sea, and stay for the girls’ choir bit at the end. It will make you feel better.
See you next week