Some snippets of news you may have missed. With grateful thanks to Financial Adviser, Money Marketing, Professional Adviser and New Model Adviser.
ifs to launch ‘practical’ diploma to help advisers through RDR
The ifs School of Finance is to launch a retail distribution review compliant diploma by the end of the year.
The course will focus on practical advice with continuous assessment of research and presentation skills not just technical knowledge. The final exam will be based around a case study sent out in advance to candidates.
The new qualification will be set a QCA level four which the Financial Services Authority suggested in its retail distribution review should be the standard for all financial advisers. Currently only the Chartered Insurance Institute offer QCA level four qualifications.
Credit crunch hits Friends’ with-profits final bonuses
Friends Provident has more than halved its with-profits final bonus rates following poor investment returns across the fund.
With-profits fund returns in the first six months of 2008 were -7.25%, which is way below the 8% return needed to keep payouts the same as they were in January. Final bonus rates for a 25-year conventional individual life plan have fallen to 17.5% from 40%. Meanwhile final bonus rates for a 10-year unitised with-profits bond have fallen to 25% from 50%. Friends Provident said there will be no change to regular bonus rates.
B&B shareholders vote to back rights issue
Bradford & Bingley shareholders have voted to support the embattled lender’s £400 million rights issue despite it still trading below the restructured 55p per share issue.
At B&B’s rearranged extraordinary general meeting in Sheffield, shareholders approved the issue which had to be restructured for the second time after US private equity firm TPG pulled out of its deal to inject £179 million at 55p per share after the lender saw its debt downgraded by Moody’s.
Government told to compensate Equitable Life policyholders
The government should compensate the more than one million Equitable Life policyholders who lost money following a decade of regulatory failings, Parliamentary Ombudsman Ann Abraham has recommended.
In her long awaited fourth report Equitable Life – A decade of regulatory failure, Abraham found successive regulators guilty of maladministration throughout a review period covering the late 1980s to the near collapse of the firm eight years ago.
Drawing parallels with the regulator’s failing over Northern Rock, the report describes how the FSA, Department of Trade and Industry and the Government Actuary’s Department (GAD) failed to protect and inform the public over the financial problems at Equitable.
Abraham recommended that the government set up a compensation fund in six months time and give it two years in which to determine the level of redress owed to policyholders.
Transfer out of Equitable may be better for some?
Hargreaves Lansdown has warned that transferring out of the Equitable Life fund could be better for some investors than waiting for compensation that may never materialise. Hargreaves says that even if the Government does decide to pay compensation to Equitable Life victims, it will take a long time as there will not even be a decision in principle until autumn. It also warns that any compensation owed will be “fiendishly complicated” to calculate.
Given that many investors in Equitable have actually done better than those in other with profits funds, Hargreaves says it will be difficult and time-consuming to determine which investors have experienced losses that are directly attributable to regulatory failure. A transfer out of the fund at this stage may or may not exclude the investor from future compensation, but there is also a risk that investors could suffer years of further poor investment performance should they keep their investments there.
Head of pensions research Tom McPhail says: “Equitable investors need to take a realistic view of the possible timing and amount of any future compensation payment for their own personal circumstances.
“This needs to be balanced against the costs and benefits of reinvesting their remaining funds elsewhere in order to achieve the best possible growth on their investments.”
Website to help advisers with retirement market
Financial planner Paul Fife and annuities expert Billy Burrows have collaborated to launch a website aimed at helping IFAs tackle the at retirement advice process. The website – funded by grants from Lincoln Financial Group, Living Time and the Hartford Annuity – lists products across the market, provides comparison tools, offers market commentary and includes a learning and development area.
The service is initially aimed at advisers but will be rolled out to consumers in the future and there are plans to cover non-annuity propositions in the long-term care and lifetime mortgage markets.
The website outlines a five-stage advice process in which an IFA makes initial contact with a client, reviews their circumstances, talks about issues options and rights, makes a recommendation and finally gets the client to agree on the selected product.
Qrops turmoil helps clarify policy, say advisers
Making it easy for clients to transfer their pensions abroad has become more complicated with legal threats against the government, but advisers say challenges in the end could help clarify policy.
HM Revenue & Customs (HMRC) wants to bar some qualifying recognised overseas pension schemes (Qrops) that attempt to skirt tax rules and requirements, but pensions legal expert Robin Ellison says the stance breaches European law and will be taken to court within months.
Qrops were introduced in 2006 following a relaxing of the pensions system at A-Day. The system allows people moving abroad to transfer their pensions savings to an overseas scheme that meets criteria set by the HMRC.
Ellison, the former chairman of the National Association of Pension funds, said that current HMRC rules on Qrops were too restrictive for European freedoms.
‘The £100,000 question is whether those rules are compliant with EU freedoms,’ said Ellison, head of strategic development at Pinsent Masons. ‘They are probably not compliant because they are in my opinion overly restrictive.’
Qrops schemes are monitored by the HMRC, after which time there are no reporting requirements. As such a number of schemes have cropped up that effectively allow people to take advantage of tax breaks in the UK and abroad where increased tax-free cash and death benefits are available, there is no requirement to buy an annuity, and investing in residential property is allowed.
The HMRC is keen to clamp down on such ‘trust busting’ activities by restricting where pension funds can be transferred.
It has already fired out a warning shot by striking Qrops from Singapore off its list of authorised schemes after a number of companies were found to be actively advertising five-year Qrops schemes that were designed purely to take advantage of double tax relief. Singapore is the only jurisdiction to have been barred, although this could change as the HMRC steps up its game on trust busting.
Bob Perkins, technical manager at Origen Financial Services, said it was difficult for advisers to fulfil due diligence requirements for the schemes when they knew nothing about the tax and legal regime of pension investments in other countries. ‘From a UK adviser’s point of view I think they are very tricky things to deal with,’ Perkins said.
‘Qrops will feature in what we talk about. Whether we would recommend them is a different matter,’ said Perkins. ‘If IFAs push this market they could well come unstuck and it could come back to bite them.’
Advisers split on following up his ‘n’ hers risk profile
Adviser James Martineau believes risk profiling is a crucial step in discovering the different financial attitudes of spouses, but his method of dealing with them was challenged at the Institute of Financial Planning East of England conference.
Different attitudes to risk could often emerge between spouses as they underwent the risk-profiling process, Martineau said. He suggested a compromise between the two risk tolerances could form the basis of a joint financial plan and portfolio.
But Swansea-based adviser Julian Melmoth claimed separate financial plans were the only viable option where such differences between spouses existed. ‘I thought that would be what everyone does,’ he said, arguing that a joint financial plan would ‘always disappoint’.
Hartford rejects criticism of third way guarantees
‘Third way’ annuity provider The Hartford has countered a recent claim by Fidelity in their report The nature of financial risk in retirement: are guarantees the answer?, that the cost of income guarantees on such policies are not worthwhile. Fidelity suggested there was only a one-in-70 chance of the guarantees being needed
However, The Hartford argues higher equity exposure afforded under third way annuity products will allow consumers to make up the cost of the guarantee and achieve higher returns than under income drawdown.
The firm compared the relative returns of its third way and income drawdown products over 10, 15 and 20-year periods from 1986. Its research assumed clients paying an additional 0.75% charge to guarantee their income could afford to be invested 60% in equities, while clients in non-guaranteed policies would be more cautious and opt for a 40% equities rating.
On this basis it said third way customers would have received an income of 5.98% compared with 5.94% in income drawdown over 10 years.
‘The argument is that for the same profit profile with the 0.75% charge your income isn’t lowered by that amount, so any income is only 10 to 15 points lower than if you don’t have a guarantee,’ said Michael Rudge (pictured), managing director of marketing and distribution at The Hartford.
‘What the guarantee does is limit the range of income you will get. Without a guarantee you could significantly increase your exposure to risk if you’re not careful.’
Deutsche’s ETFs may bring enhanced asset allocation
Deutsche Bank is launching long and short sector-based exchange traded funds in a move which could boost advisers looking to strengthen their asset allocation process.
Db x-trackers, Deutsche Bank’s ETF arm, is to launch 10 long and five short funds based on sectors including banks, food and beverages, healthcare, industrial goods, insurance and technology.
Inflation jumps to 3.8% in June
Consumer Price Index (CPI) inflation rose to 3.8% in June, its highest level since records began in 1997 and the highest since March 1992.
The Office of National Statistics (ONS) revealed that CPI inflation was ahead of analyst expectations of a more modest rise of around 3.6%. Inflation is rising at almost twice the target rate with the ONS blaming the bulk of the hike on soaring food prices.
Santander to buy Alliance & Leicester
Banco Santander is set to buy Alliance & Leicester (A&L) after agreeing a deal for the bank which values the firm at £1.3 billion. The Spanish bank intends to pump an additional £1 billion into the firm to help repair its damaged balance sheet. In a statement to the London Stock Exchange Santander said the deal could result in pre-tax synergies of £180 million.
Santander to sell asset management division?
According to reports in the Spanish press Abbey owner Grupo Santander is in talks with a number of parties to sell its asset management division.
According to Cinco Días, Santander is ready to sell its asset management arm for €3 billion (£2.4 billion), but it would also consider a partial sale. Santander is also reported to be offering any potential buyer the opportunity to sell fund products through its network of 13,500 branches worldwide.
Nine out of 10 advisers face administration burden, says Skandia
88 per cent of financial advisers consider rebalancing client portfolios once a year but only 11 per cent have the relevant discretionary management experience to do so without client approval, according to a survey commissioned by Skandia.
According to a survey of 500 financial advisers, 88 per cent of advisers recognise the need to rebalance a client portfolio on an annual basis. Of these, a fifth say they would evaluate the portfolio a few times a year.
However, of the 88 per cent only 11 per cent have the discretionary fund management status necessary to rebalance a portfolio. This leaves nine out of ten advisers who must seek client approval and potentially incur heavy administration prior to rebalancing their client’s portfolio.
Skandia head of investment marketing Graham Bentley says: “Most advisers face a real dilemma when it comes to portfolio rebalancing. When they decide a portfolio needs rebalancing to a new asset allocation most advisers have to write to their clients to get their approval first. Risk rated funds can be an ideal solution because they provide a client specific investment solution that does not incur the additional administration costs of rebalancing.”
Skandia to offload SSAS book to Rowanmoor
Rowanmoor Pensions has been selected to take over the Skandia’s £13.7m Small Self-Administered Schemes (SSAS) book of business.
Effective from 30 September, SSASs has decided to withdraw from the SSAS market in order to focus on its core personal pension and SIPP offerings.
Rowanmoor Pensions will establish a new SSAS for each of the transferring schemes and will waive the set-up fee. All the assets of the existing Skandia schemes that opt to transfer to Rowanmoor Pensions will be transferred free of charge.
Standard Life enhances estate planning proposition
Standard Life has enhanced its estate planning proposition by allowing mutual fund investments to be held inside the trust wrappers within its Gift Plan.
Until now the majority of life office trusts, including Standard Life’s, only permitted onshore and offshore bonds to be held in a trust wrapper, the assurance giant claimed.
This latest amendment will enable individuals to save on a monthly or one-off basis into a unit trust or OEIC, and benefit from any growth in the value of the funds being outside the individual’s estate for IHT purposes. The capital value of the gift falls outside the individual’s estate after seven years.
