We’ve rounded up the key news from September that affect advice firms in a bite-sized handy update for those of you who want to catch up but haven’t got the time to read every news article every day.
RegulationTreasury consults over new advice definition
The Treasury has published a consultation on redefining advice so that it relates specifically to a personal recommendation.
The Financial Advice Market Review proposed the new definition earlier this year, which would mean guidance, could not stray into advice unless a personal recommendation was made.
According to the Treasury this would make it easier for firms to offer guidance.FCA proposes more rules under Mifid II
Advisers will have to record all telephone conversations under FCA proposals under Mifid II.
In the regulator’s third consultation paper on Mifid II, it proposed requiring advisers to record their phone conversations in a bid to resolve disputes in a quick and cost effective manner. The proposal comes despite the FCA deciding against making advisers record face to face meetings with clients in July.
The FCA also raised concerns that firms were ‘undermining the spirit of the RDR’ with the way they handled inducements for advisers.
The regulator said: ‘Thematic work following the introduction of the RDR has indicated that firms continue to use various types of payment as a means of securing distribution which we regard as undermining the spirit of RDR.
‘We remain concerned about the potential for advice to be biased as a result of payments made by distributors.’
In light of this, the FCA said it would change its adviser charging rules so inducement rules on independent and restricted advice will cover ‘the wider business of providing advice’ and not just a specific personal recommendation as currently stands.
The regulator also proposed to ban independent advisers and portfolio managers from accepting payments from third parties for investment research.FCA considers standalone equity release qualification
The FCA has proposed introducing a standalone equity release qualification that could be taken by advisers who do not hold a separate mortgage qualification.
In a consultation paper, the FCA said the current regulatory regime around equity release might be a ‘barrier’ to more consumers being able to access the product.
The regulator is also looking into allowing the qualification to be a ‘top up’ of current pension or investment qualifications which would heavily feature mortgage content as the majority of the equity release market is loan-based.
PensionsGovernment reveals more Lisa details
Clarity around the government’s exit fee on the Lisa has been given as it is revealed it could claw back much more than originally believed.
Lisa savers under 40 will receive a 25% bonus on contributions into the product up to £4,000 each year.
The government will impose a 25% withdrawal charge if cash is taken out before the age of 60 or is it not used to buy a first home worth up to £450,000.
Although it seems equitable because the government is giving a 25% bonus and taking a 25% exit fee, it is not because the government would not only claw-back any bonus, but investment growth on the bonus and an additional 5% charge of any money invested as well as investment growth.
The Treasury also revealed it had changed the way it will pay the 25% annual bonus on savings held in the Lisa from at the end of the tax year to on a monthly basis from the 2018/19 tax year.Hargreaves proposes age-based pension tax relief
Hargreaves Lansdown has proposed an age-based pension tax relief system, which would encourage younger people to save as the incentive would work in their favour.
Although pension tax relief reform was much anticipated for this year’s Budget, no action has come to light so far.
As a result Hargreaves Lansdown has floated the idea of a system which would award relief on pension contributions based on age; so the younger the saver the bigger the boost from the government.
The model being suggested is tax relief, or a government top-up would be calculated as 100% of the money minus the individual’s age.
The idea has so far been backed by the Work and Pensions committee.FCA warns over dangers of using property to fund retirement
FCA chief executive Andrew Bailey has said although diverse retirement portfolios could be exposed to property, he was concerned about people using property to fund their retirement.
He said: ‘In the Financial Policy Committee we have been concerned about increasing levels of household indebtedness.
‘If the effect of increasing the demand for housing as an asset to own is to push up the cost of ownership, an increase in holdings of housing as pension assets will tend to increase the real cost, and thus household indebtedness.’
IndustryFSCS chief urges £50,000 mis-selling payouts limit to be scrapped
FSCS chief executive Mark Neale has pushed for the £50,000 limit on payouts for negligent advice to be scrapped.
Neale argued there was ‘little logic’ to having a limit on how much mis-sold clients could receive in compensation. He added the limit was confusing for consumers when retirement savings held in insurance products are fully protected by the FSCS.
He said: ‘I believe it is right to take a fresh look at the level of FSCS protection for negligent advice as part of the current FCA review of our funding.’FOS reveals complaints hitlist
The FOS took on 169,132 new complaint cases in the first half of 2016, a 3% increase on the last six months of 2015.
Payment protection insurance was the cause of 54% of new complaints.
Sesame topped the FOS list of complaints relating to advice with 160 cases, followed by Openwork with 80 cases and St James’s Place with 58 complaints.
The company with the most complaints overall was Lloyds Bank with 22,241 complaints, followed by Bank of Scotland with 22,090 and Barclays with 18,603.
InvestmentStandard Life reopens £2.5bn investment property fund
Standard Life Investments has announced it will reopen its suspended UK property fund at midday on 17 October.
It suspended dealing in the SLI UK Retail Estate fund in July following the UK’s decision to leave the EU after it encountered ‘unprecedented’ levels of redemption.