11.07.14
FOREWORD
RECORD AS 30 minutes UNSTRUCTURED CPD
Many commentators feared the introduction of the
RDR at the start of 2013 would have an
Armageddon-like impact on the sector. And while
last year was certainly an eventful one in terms of
regulation , for many advisers (if not providers) it
was more business as usual than expected. That
said, a year in there is still little certainty around
how the industry will shape up in 2014 and
beyond. There is no doubt that it’s a lower, slower
world and that costs that were insignificant now
stick out like rocks through water in a higher risk
environment. But RDR won’t kill businesses –
poor business plans will.
Pressure is being felt across the entire financial
value chain which continues its disaggregation.
With client fees moving south of 2% and the
advice fee around 1%, some parts of the chain
may feel the heat more than others. The shift to
passive funds, increased uptake of platforms and
move to centralised investment propositions place
particular pressure on providers as advisers see
many products as becoming increasingly
commoditised.
Providers’ ability to protect their position in the
market and thrive post-2013 will likely be
dependent on their ability to successfully
innovate on their key territories.
This report seeks to pull together the strands of
the key industry developments and paint a clear
picture of where we stand now in the areas that
matter most to Providers and advisers. Every
week we will explore the challenges the industry
is facing, taking an incisive 360 degree view of
what is going on in the markets relevant to your
business. Covering RDR developments, the
distribution landscape, key competitor activity,
consumer insight
and wider regulation and
taxation, the weekly review will provide a robust
but concise outline of where the opportunities and
challenges lie in light of market developments.
The Macro Picture
Distribution landscape
Provider / platform
developments
Consumer insights
Wider regulation &
taxation
Market Review
Table of contents
1.
The Macro
View




News review.
Confidence in adviser operating models.
Strength of adviser firms & business challenges.
Provider developments.
2.
Distribution
Landscape




News review.
Adviser capacity to take-on budget pension clients.
A need for education & access in the ETF market.
Firm developments.
3.
Provider &
Platform Activity




News review.
6 month summary of the investment markets
The role of price in the growth of passives.
Provider developments
4.
Consumer
Trends
 News review.
 The need for advice at-retirement is evident (1)
 The need for advice at-retirement is evident (2)
Regulation &
Taxation





5.
News review.
Have the objectives of the RDR been achieved?
Fee disclosure – FCA requirements.
Things are a whole lot NISA.
Tax avoidance – accelerated payments
The Macro View
News review
1


2
3
4
5
Last week, Aegon UK decided to end long-standing trail agreements with advisers that the insurer believed no
longer service certain clients, but this move may “not be supported by the rules”, a legal expert has claimed.
Robbie Constance, at Reynolds Porter Chamberlain, said that through its actions AEGON might be
“misinterpreting the rules” by removing servicing rights for those advisers who have been out of contact for 12
months.
The advice journey should be defined from the consumer’s perspective, not by advisers “pushing” old models
of service, Chris Williams has said.
“While face-to-face may still appeal to some, we cannot, and should not, assume that clients will not change
their behaviours or their minds about how they want to be serviced.”



The Association of Professional Financial Advisers (APFA) has warned the industry could yet lose more small
firms as advisers say they are lacking confidence in their business models.
With transparency at the forefront, an increasing need to demonstrate value to clients, and charging rules
changing, technology has never been more central to advisers' work, says IRESS executive general manager
(wealth) Mark Loosmore.
Prudential’s head of business consultancy, a division of the insurer that works with adviser firms to help them
develop their businesses, said a “by-product” of RDR was that IFAs had become better organised in
managing their time and had clarified their service for clients.
“We have noticed that IFAs are focusing on how to run efficient businesses. They are using paraplanners
more effectively, looking to recruit more staff and considering their ongoing service for clients.”
Adviser Operating Models
Confidence in getting it right
Aggregated financial data for the industry only tells part of the story with regards to how the RDR has
affected advice firms. A recent report from APFA details research that highlights there are still a not
insignificant number of firms struggling to get the right business model in place.
7 - not at all confident
6
5
4
3
2
1 - very confident

Research company GfK NOP Limited has been monitoring
adviser sentiment since RDR was implemented. Whilst the
majority of firms are confident that they have developed their final
operating model, and that they will sustain a healthy flow of
revenue by the end of 2014, there is still a significant minority of
firms that are not so confident.

When asked by GfK how confident they were that they had
developed their final operating model, on a scale of 1 (totally
confident) to 7 (not at all confident), 72% of advisers said they
were confident (scored 1 to 3), 12% were neutral (scored 4) and
16% said they were not confident (scored 5 to 7).

When asked how confident they were that this operating model
will sustain a healthy flow of revenue by the end of 2014, 80%
said they were confident (scored 1 to 3), 9% were neutral (scored
4) and 11% said they were not confident (scored 5 to 7).
18
27
27
31
27
22
12
8
3
5
CONFIDENCE DEVELOPED
FINAL OPERATING MODEL
Source: APFA
9
5
3
2
CONFIDENCE OPERATING
MODEL W ILL SUSTAIN HEALTHY
FLOW OF REVENUE BY END
2014
Despite the expected RDR Armageddon failing to
materialise, it is evident that some firms are still
struggling with implementing a sustainable
business model. The lack of confidence among
some seems to scream out for support.
Firm Performance
Strength and challenges
While the proportion of firms seemingly thriving post-RDR is on the rise there remains a significant
minority seeing business decline. The challenges being faced reflect the ‘new world’ adviser firms
are now living in.
THRIVING
OR
ASPIRING
BUSINESSES
DECLINING
BUSINESSES
69% IN 2014
(up from 65% Q2 ‘13)
31% IN 2014
(down from 35% Q2 ‘13)
Adviser perceived challenges for the coming year
 NMG segment their survey respondents into “Thriving”, “Aspiring”,
“Surviving” and “Declining”. Whilst the number of firms in the first two
categories has grown over the last year (from 65% in Q2 2013 to 69% in
Q1 2014) there still remains a significant minority - 31% - in the
“Surviving” and “Declining” categories.
 This group is significantly less confident about the state of the market and
the prospects for their own business, and make less use of paraplanners
and social networking than those in the “Thriving” and “Aspiring”
categories. Those in the “Declining” category (11% of respondents) are
also more dependent on commission from pre-RDR investment business
than the other groups.
 As part of its research, GfK asked firms what the biggest challenges are
that they now face. As the chart shows, regulation, new business
development and charging fees were the top three concerns. Profitability
and managing workload/maintaining service standards also featured for a
number of firms.
“
Source: APFA
This split between those firms that are doing
well and those that are struggling could lead
to more small firms deciding to join a larger
one, or to exit the industry altogether.
”
The Macro View
Provider developments
 Cofunds has said it will be
offering clients a discount on
the Multi-Index fund range run
by parent company subsidiary
Legal & General Investment
Management.
 Platform provider Alliance Trust
Savings is making four of the
six employees in its marketing
team redundant as it looks to
outsource the majority of
marketing functions.
 The Multi-Index 3, 4, 5, 6 and
7 funds will be available on the
platform for an ongoing charge
of between 0.24% and 0.27%,
the platform said. The usual
ongoing charges for the funds
range from 0.31% to 0.34%.
 Staff were informed of the
move last week following a
review although ATS says
there may be the opportunity
for redeployment in some
cases.
 It is unclear as yet who ATS
will outsource marketing to.
 The standard annual
management charge on the
funds is 0.25% but is
discounted to 0.18% for
Cofunds customers.
“
“
“
This fund means that we’re able
to deliver a highly attractive option to
Cofunds clients, which could be very
useful with the significant changes to
retirement provision just around the
corner.
”
Source: David Hobbs, chief executive at
Cofunds
Alliance Trust Savings confirms
that it has conducted a review of its
marketing operations and has taken
the strategic decision to outsource
the majority of this work going
forward.
”
Source: An ATS spokeswoman
 Cofunds is set to offer funds
from parent-company Legal
and General at a discounted
price.
 Legal and General Investment
Management will launch a ‘C’
share class on its multi-index
funds, priced at a 0.07%
discount for Cofunds clients.
This fund, when combined in a
pension proposition, means that we’re
able to deliver a highly attractive option
to Cofunds clients, which could be very
useful with the significant changes to
retirement provision.
”
Source: Cofunds chief executive David
Hobbs
 Standard Life will remove
commission from all autoenrolment pension schemes
from April 2015 if the payment
brings the charge above the
Government’s 0.75% cap.
 Steve Webb revealed plans to
place a 0.75% price ceiling on
all auto-enrolment default
funds from April next year.
 In response, Standard Life will
remove all funded initial
commission by the end of
2014 before cutting off
commission on schemes with
a charge above the cap in
April 2015.
“
To support advisers on their
transition to fee based remuneration we
will in some cases offer fund based
commission in its place until the ban
comes into force.
”
Source: Statement
Distribution Landscape
News review
1
2
3
4
5

Skipton Building Society has revealed it is launching a retirement service, with the strapline ‘Skipton – For Life Ahead’.
The service will include an online retirement planner for an indication of their retirement readiness in minutes and
pension analysis and advice service through subsidiary Skipton Financial Services.

Key Retirement Solutions picked up the award for best large adviser firm website for the
second consecutive year at this week’s night’s FTAdviser Online Service Awards. In the
small adviser category, covering firms with less than 20 employees, RJL IFA’s website was
adjudged best.

CTC Software is set to begin testing a new retirement planning tool in response to this year’s radical Budget reform.
The financial services software provider says the tool, which allows users to compare outcomes of different retirement
strategies, will be trialled with a set of advisers over the summer with a view to rolling it out later in the year.

An academic study has suggested that a ‘restricted licence’ approach could be implemented to enable lesser qualified
financial advisers to give financial advice and that chartered and more qualified advisers can deal with more
sophisticated clients.
“There should be a place for those who want to stay with their diploma or learn in their profession, with a lesser risk
consequential element to their advice while they’re still developing.”

Business volumes in financial services were up in the three months to June fuelling optimism in the industry, despite
an unexpected fall in profitability, according to a survey by the Confederation of British Industry (CBI) and PwC.
37% of financial services firms said they felt more optimistic
Almost half (48%) of firms said business volumes
about the overall business situation compared with three months
ago, while 9% said they were less optimistic.
were up, while 15% said they were down.
Budget Pension Clients
Advisers have capacity but…
More than 80% of advisers have capacity to take on new clients seeking pension
decumulation advice following the Budget, Apfa research shows. But the research also found
a fifth of advisers would not advise on pots below a certain level.
 There is something of a mixed picture when it
comes to the ease with which consumers can
access advice post RDR.
 A report from Apfa on the impact of the RDR
shows 83% of advisers would be willing to take
on more pension clients following the radical
pension reforms announced in the Budget,
based on a poll of 300 advisers.
 However, 19% said they would not advise on
pots below a certain level and a further 50% said
they may turn down pots of a certain size
depending on the specific case.
NMG research from January 2014 found
that just over half of advisers had turned
away clients during 2013, with
profitability to the firm mentioned almost
as often as cost to the client.
Source: APFA
Capacity of advisers to take on new
pension decumulation clients
“
Whilst there
may be
capacity within
the market,
advisers may
only take
clients on if
they consider it
economic to do
so – both for
the firm and for
the client.
”
ETFs
Need for better access & more education
Better access and more education are needed to increase ETF usage according to vanguard adviser
poll.
Expected change in adviser ETF use
over the next 12 months

Vanguard Asset Management released the findings from a poll
taken at its June Investment Symposium showing that advisers
believe that lower costs (32%) and better availability on UK
platforms (32%) are the most likely reasons to start or increase
their usage of Exchange Traded Funds (ETFs).

A further 26% of those polled said more education was needed
to help inform ETF asset allocation decisions.

Nearly all of the respondents in the poll plan to maintain (47%)
or increase (50%) their ETF allocation over the next 12 to 24
months.
3%
47%
Source: Vanguard
”
26
“
We are seeing increased appetite for
ETFs as many more advisers are
recommending them for clients’
portfolios. However, it comes as no
surprise that more education and better
availability on UK platforms is needed to
encourage greater usage.
32
What will help drive increases?
32
50%
LOW ER COSTS
AVAILABILITY ON UK BETTER EDUCATION
PLATFORMS
Distribution Landscape
Firm developments
 Brewin Dolphin is considering
a rebrand in its effort to push
into the direct-to-consumer
space.
 The firm says it is currently in
discussions over how best to
serve direct clients with
branding one element under
consideration.
 It is understood one option
being considered is the
dropping of “Dolphin” which
would see the firm just known
as Brewins by consumers.
“
It is a matter of record that we see
the advice gap widening and that we
would explore and evaluate how best
to address the demands for a direct
to client offering.
”
Source: Brewin Dolphin head of
investment management Stephen Ford
 Succession plans to expand
corporate solution business.
 Bernadette Briggenshaw has
joined Succession Group as
national development director
responsible for its corporate
benefits proposition,
Succession Benefit Solutions.
 Ms Briggenshaw will lead the
Succession Benefit Solutions
Board and plans to double the
size of the team of corporate
specialists within six months.
“
Legislative change has created
significant challenges for employers
and we have created a specialist
small employer solution, aimed at
SMEs with up to 50 members of
staff.
”
Source: Simon Chamberlain, group chief
executive of Succession
 Gemini will take on Lichfieldbased Simple Finance
Solutions' 450 pension and
investment clients after director
William Cooper decided to
"change his focus" due to "the
ever increasing costs and
pressures of being a sole
practitioner".
 The deal - the firm's seventh
since its inception in 2006 - will
see Gemini's client base grow
to 2,000 clients and its total
client funds under
management jump from £200m
to £230m.
“
These acquisitions continue to
emphasise Gemini's strategy of
actively growing for the future with
the aim of becoming one of the top
IFA firms in the West Midlands.
”
Source: Gemini director Amanda Reid
 Chase de Vere has set aside
£4.1 m to cover the cost of
complaints and redress related
to legacy advice on distressed
assets, its annual report for
2013 has revealed.
 The firm said it had been
experienced an increased
number of complaints related
to legacy sales associated
with investments classed as
distressed.
 Reports have suggested that
these complaints relate to
unregulated collective
investment schemes.
“
It is right that we have made
additional provisions for legacy
product sales. This means we have
funds available to recompense
clients if they are entitled to any form
of redress.
”
Source: Stephen Kavanagh, chief
executive of Chase de Vere
Provider & Platform Activity
News review
1
2
3
4
5

Platforms have responded to Budget changes to the Isa regime by improving rates on cash and introducing new cash
savings products. In the Budget, the Isa limit increased to £15,000 and restrictions on moving between cash and stocks
and shares Isas have been removed from 1 July.

Total equity released in the first six months of this year soared 26% to £641.8m from £508.4m in the first half of 2013,
according to data from provider Key Retirement Solutions.

Plans to mitigate the potential tax avoidance opportunities offered by the proposed new pension freedoms are unlikely to
meet the three key features of being proportionate, simple and sustainable, warned AJ Bell’s chief executive Andy Bell.
“The government may attempt to adapt current recycling rules to restrict the possibility of tax avoidance but I would
suggest that these are not robust enough to deal with the issue.”

Zurich has launched eValue’s Funds Risk Assessor tool through its retail platform, to help advisers and customers select
funds that match their risk profile and timescale. The insurer claims to be the first UK platform to offer this tool, which
covers a wide range of on-and off-platform assets, to advisers.

Financial Services Compensation Scheme (FSCS) chief executive Mark Neale is "increasingly concerned" by the rising
number of claims the service is receiving that are linked to advice to move pensions into risky assets held in self invested
personal pensions (SIPPS).

The electronic Transfer and Re-registration saw continued steady progress
during the second quarter of 2014. The overall volume of electronic transfers
rose by close to 10%, over the first quarter of 2014 and at the end of the
quarter around 83% of AUA on adviser platforms and 91% of FUM are now
supporting electronic Transfer and Re-registration.
Investment Markets
6 month summary
30/12/13
30/06/14
Change to 30/6
FTSE 100
6,749.09
6,743.94
-0.1%
FTSO 250
15,935.35
15,723.56
-1.3%
FTSE 350 HIGHER YIELD
3,653.20
3,677.68
0.7%
FTSE 350 LOWER YIELD
3,333.44
3,291.76
-1.3%
FTSE ALL-SHARE
3,609.63
3,600.19
-0.3%
S&P 500
1,848.36
1,960.23
6.1%
EUO STOXX 50 (€)
3,109.00
3,228.84
3.9%
NIKKEI 225
16,291.31
15,162.10
-6.9%
BANK BASE RISE
0.50%
0.50%
10 YR UK GUILT RISE
3.04%
2.68%
10 YR T-BOND YIELD
3.03%
2.52%
10 YE GERMAN BOND YIELD
1.94%
1.25%
£/$
1.6563
1.7099
3.2%
£/€
1.2020
1.2489
3.9%
£/¥
174.080
173.216
-0.5%
BRENT CRUDE ($)
110.80
112.36
1.4%
GOLD ($)
1,201.50
1,315.00
9.4%
IPD UK PROPERTY
914.5
997.7
9.1%
NATIONWIDE INDEX
£174,566
£186,512
6.8%
RPI INFLATION
2.6%
2.4%
CPI INFLATION
2.1%
1.5%
Source: Technical Connection
The first half of 2014 is over for the investment
markets. There was not a great deal of movement in
the equity markets and the big surprise was in the
bond markets, where yields fell, confounding many
forecasts.
A few points to note from this table are:
 The UK stock market has gone virtually nowhere in the half
year, despite the resilience of the economic numbers.
 The US market has done better in the face of a very
difficult (and cold) first quarter and that relentless tapering
process.
 The Eurozone overall outperformed the UK, mainly due to
the peripheral markets, such as Spain.
 The dog that didn't bark was bond yields: the predicted rise
turned out to be an unexpected drop.
 Sterling has strengthened against both the dollar and the
Euro. The flip side of the rising pound is that it has taken
the edge off overseas equity market performance for UKbased investors.
 UK property, both commercial and residential, did well over
the period. On the commercial side, each of the last 13
months has seen a rise in values according to IPD.
 Gold recovered some of its lustre after a bad 2013, but oil
was little moved, despite various supply issues such as the
problems in Iraq.
The Popularity of Passives
The role of price in growth

Figures from the Investment Management Association
(IMA) show the number of available tracker funds is up
11% on the start of the year, rising from 63,921 to
70,852 by the end of the third quarter, comprising 9.6%
of the industry total – a record high.

Their increasing prominence has led investment
services provider Morningstar to issue a ratings
system for passive funds as a reaction to their growing
popularity.

Yet, a survey of advisers carried out by Schroders
indicates the industry may be approaching a "ceiling"
where passives are concerned.

… however,
Source: IMA
is the factor that could continue
to drive the use of passive funds
EXCLUSIVE
PREFERENTIAL
SHARE CLASS
TERMS
Two thirds of the 328 advisers asked have increased
their use of passives this year, however, just 25%
expect to increase the proportion during the next 12
months. This "indicates we may be reaching a ceiling
on passives", according to Schroders head of UK
intermediary Robin Stoakley.
% advisers expecting an increase in passive over the
next 12 months
PRICE
ABOLITION
OF STAMP
DUTY ON
ETF’S
GREATER PRICING
TRANSPARENCY

A Barclays research note indicated that the RDR environment, and
the greater pricing transparency that comes with it, is conducive to
passive growth.

CWC Research director said a consequence of exclusive preferential
share class terms might be to motivate those who cannot obtain
them to rely more heavily on passives.

Additionally, stamp duty on EFTs will be scrapped from April,
increasing the probability of new, domestically-domiciled funds
coming to market. A more competitive market will drive down costs,
adding to the allure of passive options.
Provider & Platform Activity
Firm developments
 Transact is considering taking
more stakes in software
companies after the platform
acquired a 15% interest in
Sprint Enterprise.
 Aviva Investors has launched
the Aviva Investors MultiStrategy Target Return fund,
the first offering in its new
outcome-oriented fund range.
 Zurich is not interested in
participating in a platform price
"race to the bottom", its head of
retail platform strategy has
said.
 Old Mutual Wealth’s
acquisition of network Intrinsic
has officially completed today
(1 July) after receiving
regulatory approval.
 The deal, announced in May,
saw the firm’s chief
development officer Jonathan
Gunby join the board of Sprint.
 The Aviva Investors MultiStrategy Target Return fund is
managed by head of multiasset Peter Fitzgerald and
global head of rates Dan
James, with extensive input
from a company-wide Strategic
Investment Group chaired by
chief executive Euan Munro.
 Alistair Wilson said the
apparent trend among
operators of under-cutting their
rivals was tantamount to
obsessing over a "level of
comparison that is not a lot of
money in some cases".
 The deal will see Skandia
platform and protection
products, as well as a range of
Old Mutual Global Investors’
funds, available via Intrinsic’s
selected panels.
“
“
 Sprint provides software called
Fastrak, which is designed to
aggregate data from advisers’
back-office systems and
platforms to produce
enhanced reporting and
portfolio analysis capabilities.
“
If we come across companies that
we think are interesting, we will have
a look at them. Often we think early
involvement and co-operation works
to everyone’s advantage.
”
Source: Chief executive Ian Taylor
We aim to deliver simple and
specific outcomes that clients will
value combining our considerable
expertise in real estate, fixed income
and equities together into compelling
solutions.
”
Source: Chief executive Euan Munro
 The industry, he suggested,
was competing over as little as
20p a day.
Is price the right focus? I don't
believe so, which is why we are very
focused on protecting people's future
going forward in different ways.
”
Source: Alistair Wilson Head of Retail
Platform Strategy
“
The acquisition of Intrinsic is an
important part of our integrated
customer proposition that now covers
financial advice, actively managed
portfolios and wealth management
products.
”
Source: Paul Feeney, chief executive of
Old Mutual Wealth
Consumer Trends
News review
1

2
3
4
5
People do not want general guidance on retirement products but individual face-to-face guidance over multiple
sessions as they lack a basic understanding of retirement products, according to Axa Life Invest. Most participants did
not understand how the income stream from their pot would be calculated.
“They want face-to-face individual guidance over multiple sessions and tailored to their individual situation and
needs. Guidance should be a stepping stone leading towards personalised advice.”

Research from the Department for Work and Pensions showed that pensioners have enjoyed modest real terms
income growth over the past three years and substantially more significant income growth than between 1999 and
2013, attributed to the triple lock protection of the state pension and more older people choosing to stay in work.

An Aegon-commissioned survey has revealed that 44 per cent of UK adults intend to take advantage of the radical
pension changes in the Budget.

44% Would put the money
33% Would invest the money
into a bank account
into an ISA
81%Interested in a guaranteed
income for life, but could cash in
if circumstances changed
Savers are becoming increasingly frustrated by the poor returns available on cash ISAs. In the run up to the end of
the tax year, Fidelity Personal Investing commissioned a poll of ISA savers, where people were asked about their
priorities for their annual allowances
73% of people holding Stocks
40% want to take advantage of
24% of people currently hold
& Shares ISAs say that they do so
in order to get a higher rate of
return on their savings
the current higher tax allowances
available to Stocks and Shares
ISA savers
Stocks and Shares ISAs because
they’ve already used up their cash
ISA allowance.
At-Retirement
The need for advice is evident
Over the past few days there have been a number of different surveys and reports looking at attitudes of both
individuals and companies into the pension changes due to be introduced from April 2015. Each of these surveys
highlights the need for more than just guidance at retirement.
The Financial
Resilience of the
Recently Retired
The Proposed at
Retirement Guidance
Guarantee
New-Found Financial
Freedom Changes
Behaviour in Retirement
The main findings of the report are that:
The main findings of the report are that:
The main findings of the report are that:
 For those individuals and couples reliant
on the state pension, the triple-lock
guards them well against the risks of
inflation throughout retirement.
 83% of over 55s believe that the pension
guidance guarantee announced in the
Budget
should
be
impartial
and
independent from pension providers.
Regarding provision of such a service,
24% said that they would trust an existing
organisation such as The Pensions
Advisory Service.
 7% of people plan to be 'Lamborghini'
retirees, taking the entire fund as a lump
sum.
 Those more reliant on private pension
income, and in particular DC pension
income, could see a significant fall in
their actual income against their
income requirement, a fall from
receiving 95% of required income in 2012
to 76% of required income in 2022).
 Even those with a DB private pension find
their income is no longer sufficient to meet
their income requirements and cover the
additional spending needs of their
disability, a fall from receiving 114% of
required income in 2012 to 92% of
required income in 2022).
 Perhaps more worryingly, only 23% of
those questioned said they would trust
professional finical advisers to provide
the guidance.
Source: Pensions Policy Institute / MGM Advantage / Friends Life
 25% of people plan on taking 50% or
more of their fund as a lump sum.
 33% was the average lump sum
withdrawal being considered by those
questioned.
 Of those taking the lump sum 24% were
planning to reinvest elsewhere, typically:
 22% The new ISA (NISA)
 21% Buy-to-let property
 14% Stocks and bonds
At-Retirement
The need for advice is evident
Pension Confusion
is Rife Among
Retirees
Poverty in
retirement top
concern for Brits
2014 Defined
Contribution Strategy
Survey
The main findings of the report are that:
The main findings of the report are that:
The main findings of the report are that:
 A poll of 500 members and employers by
The Pensions Trust (provides pension
solutions for over 2,400 not-for-profit
organisations and administers more than
200,000 members) has found a lack of
understanding of the options both in
retirement
and
leading
up
to
retirement. Key areas of confusion
amongst individuals included whether
they could:
 The research, conducted by YouGov for
AXA Wealth, which looks at attitudes
toward and preparations for retirement
among UK adults, identified the top
concerns:
 Around two-thirds of employers anticipate
that workers will place more value on their
DC pension as part of their reward
package.
 stop working before the age of 65
and still draw their pension,
 draw both a private and a state
pension, and
 how much can be taken as a tax
free lump sum, and if so, how
much.
 38% are nervous of a shortage of
funds to achieve retirement
ambitions
 29% are really worried about not
having enough money to cover
essentials such as food and
heating
 79% believe the Budget introduces a
need for greater support above and
beyond Guidance.
 40% believe that DC will now be more
effective at managing workers into
retirement than it used to be.
 5% are worried about becoming
financially reliant on others.
 Demonstrating
their
absence
of
preparation,
three
in
10
(30%)
respondents admitted to not knowing
how much money they will need to live
on.
Individuals need help on their retirement journey almost from the minute they're ready to start contributing into a pension. It will
be interesting how many who receive the proposed 'guidance' will then feel the need to seek further specific and tailored advice
and then if they realise they should have got advice earlier and whether they will pass those thoughts on to the next generation.
Source: The Pensions Trust / Axa Wealth / Towers Watson
Regulation & Taxation
News review
1
2
3
4
5

Freedom to access pension savings could see one in 10 retirees lose their exemption from care costs, nursing
agency warns. Jonathan Bruce, managing director of Prestige Nursing Plus Care, said it is vital that moves to
revolutionise pensions and care systems do not add to the financial fog that clouds decision making in later life.

Monies investment firms hold within stocks and shares Isas are to be held as client money in the wake of changes
made in the Budget to the savings vehicle, the Financial Conduct Authority has confirmed. The policy statement also
clarified that it will be allowing money held within cash Isas managed by investment firms to be held as client money.

The FCA is increasingly requiring senior individuals to put their name to compliance guarantees without making it
clear their signature will be used against them in the event of enforcement action. Lawyers say there has been a
significant increase in the use of attestations by the FCA in the past six months and predict enforcement proceedings
in the coming months as a result.
“It’s a genius idea – the regulator asks the chief executive to sign a piece of paper saying everything is fine and then
six months down the line, if something goes wrong, they can put that back in front of them and ask why they told an
untruth.”

The Financial Conduct Authority (FCA) has confirmed advisers' regulatory fees for the next year will be £68m - a
near-19% reduction on last year, in its latest policy statement.
The FCA dismissed claims from trade bodies
the 15% of total annual funding allocated to the
adviser fee block, A13, is too big a share and
calls to split A13 to reflect 'retail' and 'wholesale'
sales.
It also fought back calls for a reimbursement of the
fees it was deemed to have 'overcharged' advisers,
saying the cut to fees "does not mean that some
firms have been historically ‘overcharged' any more
than others have been ‘undercharged'".
Regulation & Taxation
Other stories passing the desk
 Members of the Standard Life self
invested personal pension who
have investments in the collapsed
Catalyst Investment Group Limited
have been affected by a delay in
receiving compensation from the
Financial Services Compensation
Scheme due to a potential tax
liability.
 The FSCS said it is working with
Standard Life to ensure that those
Sipp members who make a
successful claim are not subject to
any adverse tax and HM Revenue
and Customs reporting
requirements
 New powers which will see HMRC seize £7bn in
disputed tax could trigger a wave of misselling
complaints against advisers.
 When the 2014 Finance Bill is given Royal Assent this
month, HMRC will begin issuing “accelerated payment
notices” – demands to pay tax within 90 days – to tens
of thousands of individuals.
 Regulatory experts say the notices will trigger a torrent
of complaints against advisers for recommending the
schemes and failing to give clients sufficient warning
that they may have to pay upfront.
 New intestacy rules, which apply when
individuals die without a valid will and
govern the distribution of assets, will come
into force from 1 October, it has been
announced.
 Under the new rules, the surviving spouse
will now receive the full estate and other
changes include a change to the definition
to “chattels”, which may impact some
existing wills which refer to this definition.
 Experts have warned proposals to
merge income tax and National
Insurance contributions will be a
“nightmare” to deliver.
 This week, it was reported combining
the taxes would be included in the
Conservative manifesto for the 2015
general election. However, sources
close to the party have poured cold
water on the idea.
 The Office of Tax Simplification,
established by Chancellor George
Osborne in 2010, has previously
suggested merging NICs and income
tax although the Government has not
taken up the recommendation.
 Property searches by HM Revenue & Customs
(HMRC) to target tax evasion jumped by 12%
to 500 in the last year, according to official data
obtained by law firm Pinsent Masons.
 The figure, which covers the year to 31 March
2014, marks an increase from 445 property
raids in 2012/13.
 This is more than triple the number of property
raids that HMRC undertook each year between
2008 and 2011.
RDR
Have the objectives been achieved?
Below APFA consider each of the FCA’s desired outcomes in turn, and give their view on whether they have
been achieved.
OBJECTIVE
Outcome 1: An industry that engages with
consumers in a way that delivers more clarity for
them on products and services
Outcome 2: A market that allows more
consumers to have their needs and wants
addressed
MET / UNMET
MET IN
PART
NOT MET
RATIONALE
Whilst there may be more disclosure by advisers, it is not yet clear whether consumers
fully understand the different types of services and the related costs and levels of
protection. Advisers’ understanding of the disclosure requirements will be helped by
stability of the rule framework.
The evidence suggests that whilst there may be sufficient capacity within the market,
not all consumers who want face-to-face advice may be able to access it, as advisers
decide it is not economic to take them on. Those consumers with smaller amounts to
invest are likely to be the most affected.
Outcome 3: Standards of professionalism that
inspire consumer confidence and
build trust
MET
Overall the advice sector is becoming increasingly professional, as increasing
numbers of advisers hold qualifications beyond the level required by the rules, and
adviser firms continue to have one of the best records on complaints in the industry.
Outcome 4: Remuneration arrangements that
allow competitive forces to work in
favour of consumers
MET IN
PART
While advisers are becoming more transparent about their fees, it is too early to tell
what impact RDR will have on competition within the market. As many advisers get
new clients through referrals, and for many clients it is the long term relationship with
the adviser that is more important than the cost, greater disclosure may not have a
significant impact on consumers shopping around.
Outcome 5: An industry where firms are
sufficiently viable to deliver on their longer-term
commitments and where they treat customers
fairly
REMAINS
TO BE SEEN
Overall the sector has adapted to the changes brought about by RDR, and firms
continue to offer their clients a valued service. However over the longer term
increasing numbers of firms, particularly smaller ones, may struggle to operate
sustainably, particularly in the face of significant costs of regulation.
Outcome 6: A regulatory framework that can
support delivery of all these aspirations and
which does not inhibit future innovation where
this benefits consumers
REMAINS
TO BE SEEN
Evidence of whether the regulator really has changed depends on the outcome of the
various reviews and consultations that are currently underway or planned. It is
therefore too early to conclude that the regulator is able to get the balance right
between consumer protection and a thriving, competitive and innovative marketplace.
Source: APFA
Fee Disclosure
FCA requirements
According to the FCA, if you are unable to answer the
questions below positively, you may not be meeting the
requirements.
The results of FCAs second paper, Supervising retail
investment firms: being clear about adviser charges and
services showed 73% of firms failed to provide the required
information in at least one of the areas specified.
1) Can your clients understand your charging structure?
Failings around upfront generic information on how much advice
might cost.
2) Do you disclose your initial and ongoing charges in
cash terms?
Failings around how much advice would cost clients as individuals.
3) If your charge is a percentage, do you provide cash
examples?
Firms failed to give additional information on charges, for example,
not highlighting that ongoing charges may fluctuate.
4) If you charge an hourly rate do you provide indicative
examples?
Firms offering a ‘restricted’ service were not being clear that they
were restricted, or the nature of the restriction.
5) Do your clients receive your charging structure before
you provide any advice services?
6) Where initial charge for regular premium business is
paid in instalments, do they end when the initial charge
is paid off?
Source: FTAdviser
Firms failed to explain clearly to clients the service they offer in
return for an ongoing fee and/or their right to cancel this service.
Source: Money Marketing
Individual Savings Accounts
Things are a whole lot NISA
As of July all existing ISAs will become NISAs. With this in mind, how many clients
understand the implications for them in relation to any savings already made and the
ability to transfer funds? We provide a reminder of how these rules will apply.
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3
It will be possible to hold £15,000
in cash, stocks and shares or any
combination of the two – this
means there is no restriction on
the amount that can be held in
cash as there was under the
previous rules.
Those aged 16 and 17 will be
eligible to hold a cash NISA in the
same way as they could
previously, and will now benefit
from the increased £15,000
subscription limit. However, they
cannot hold a stocks and shares
NISA.
Any contributions made since 6
April 2014 will count towards the
£15,000 limit – whether or not it
will be possible to add to an
account will wholly depend on the
terms and conditions of that
account.
4
5
Current year ISA savings must be
transferred in full – so if
contributions have been made
since 6 April 2014 the whole
amount must be transferred into a
NISA.
It will also be possible to transfer
previous years' ISA savings
between stocks and shares and
cash, in whole or in part. This was
not previously permitted and
transfers can now be made as
many times as required
1
“
“
Source: Technical Connection
 From a tax perspective, while saving into a
pension provides a client with upfront tax relief and
the benefit of tax free roll up in the pension fund,
not all savers can afford to tie their money up until
retirement age as they may require it before then.
 For these clients, saving into a NISA can provide
the answer as they benefit from tax free roll up and
investment flexibility, with no tax on funds when
withdrawn. Moreover, it can also provide a solution
for those who have already maximised their
pension.
Tax Avoidance
Accelerated payments
New provisions, which will probably apply from sometime in July 2014, are designed to remove the cash flow advantage for the
taxpayer that currently exists in relation to most direct tax disputes; and to help HM Revenue & Customs (HMRC) to clear the
backlog of disputes relating to past tax avoidance schemes.
HMRC will be able to give an 'accelerated
payment notice' to a taxpayer if a tax enquiry or
tax appeal is in progress and:
1. A follower notice has been given or is given at the
same time in relation to the same return and same tax
advantage.
2. HMRC has issued a DOTAS reference number in
relation to the arrangements (or similar arrangements
where the promoter is required to notify a scheme
reference number to the taxpayer).
3. a general anti-abuse rule (GAAR) counteraction
notice has been given in a case where the stated
opinion of the Advisory Panel was that the
arrangements were not a reasonable course of action.
Source: Technical Connection
“
In relation to financial advisers (i.e. not
accountants, not lawyers and not out-and-out
tax specialists), one would question just how
many of these will have actively promoted tax
schemes carrying a DOTAS number. We may
be wrong and we have not carried out formal
research but the answer may well be possibly
not so many.
”
 The accelerated payment notice will be discharged by a settlement of the
dispute with HMRC, and so for those who have also received a follower
notice, will only be relevant to those who decide not to comply with the
follower notice and to continue with their own dispute.
 The proposals are particularly controversial in relation to DOTAS schemes. A
DOTAS scheme user could have to make an accelerated payment of tax in
relation to a scheme entered into many years before these provisions
become law, even though their use of the scheme is still under enquiry or
being litigated and despite there being no other judicial ruling in respect of
the scheme in question.
 There are penalties if you fail to pay the accelerated payment within 90 days
of the issue of the notice.
Impossible
… or nearly impossible? [Seth Godin]
• Is as big as any difference we
encounter.
• All we need is 'nearly' and we have
completely transformed the problem,
changing it from one to avoid to one
to commit to.
• Here's the hard part: having the ability
to see (and to announce) the 'nearly'
part.
• Almost every breakthrough comes
from someone who saw nearly when
no one else did.