keith - the personal finance society · pfs chief executive keith richards opened the conference by...

KEITH RICHARDSPersonal Finance Society

CEO

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O P I N I O N O P I N I O N

Spring 2017 | Personal Finance Professional | thepfs.orgthepfs.org | Personal Finance Professional | Spring 2017

O P I N I O N

While navigating through a period of polit ical and economic uncertaint y, the PFS remains committed to ensuring that regulators and legislators build on the

momentum for reform following last year’s Financial Advice Market Review. Ke ith Richards comments.. .

After a well earned break during the Christmas and new year period, 2017 has kicked off at a frenetic pace and it is only going to get busier as we look forward to another year of political and economic upheaval.

With President Trump taking power in the US and the UK heading towards a hard Brexit, there is a lot to keep legislators and

regulators occupied in the coming months.As negotiations regarding the terms and

conditions of the UK’s withdrawal from the EU continue, a degree of uncertainty will linger; and for professional advisers this means an increased level of demand from consumers worried about the impact on their personal financial circumstances.

In the case that Brexit negotiations result in a material impact on our profession, we will be sure to keep you informed and updated.

Our underlying commitment in 2017 will be to ensure that attention remains firmly on ensuring that the regulatory progress we helped shape and influence throughout 2016 continues with momentum in the year ahead.

FIN AN C IAL ADVICE MARKET REVIEW (FAMR)FAMR will continue to attract much of our attention in the year ahead, as the Financial Conduct Authority and Treasury continue to seek input on

highlighting the growing issue of investment mis-selling on the island.

Launched in association with the Jersey Financial Services Commission, the campaign followed an increasing number of cases where local investors had lost their life savings after making high risk investments – mostly through mis-buying or unregulated advisers. (Watch the video now at: www.vimeo.com/200168393)

Through TV advertising, leaflets and various media outlets, the regulator was keen to highlight the value of professional advice, so as to introduce balance and not tarnish the reputation of the majority.

The campaign followed the launch of our very own anti-scamming campaign, which calls on you, our members, to join the fight against scammers and fraudsters by committing 15 minutes each month to help identify and report potential scams.

The risk of scams continues to threaten the vulnerable in our communities and every one of us is responsible for doing all we can to combat the rising threat posed to our clients, friends and family.

Our pro bono and social inclusion initiatives will play an important role in 2017, and we will continue to work with consumer groups including Citizens Advice to extend our programme of existing and yet-to-be-announced initiatives.

We are expanding MoneyPlan, which is now offered at more than 100 Citizens Advice services across England and Wales, and we continue to progress our Advice for Heroes initiative, offering injured and recovering service personnel and veterans access to free, generic financial advice.

EVENTS A ND CPDWe are already halfway through our Q1 Regional Conferences and I am thrilled with the number of actively engaged members who attend and gain real value from these events.

key regulatory proposals.We are putting the finishing touches to our

submission to the regulator’s consultation on funding the Financial Services Compensation Scheme (FSCS), which was released prior to Christmas.

While we were broadly happy with paper, we were disappointed that an investment product levy was effectively ruled out as we have long argued for the scope of the review to be as broad and all-encompassing as possible, if only to later discount certain ideas.

FSCS funding reform is acknowledged to be one of the most important issues to come out of FAMR and our views will be reflected in our submission, which is due at the end of March.

Last month, we submitted our response to the Treasury’s consultation on pension scams and cold calling, which followed Personal Finance Society member Darren Cooke’s petition calling for an urgent ban on cold calling.

We will continue to engage with policymakers throughout 2017 to ensure the profession is properly represented in all discussions and debates and that positive consumer outcomes are protected.

CALL TO ARMSAs we ramp up our pro bono and consumer-focused campaigns in 2017, we will be calling on you to offer your support.

In January, I travelled to Jersey to help launch a major public awareness campaign aimed at

The evolution of our CPD programme will continue throughout the year, with new initiatives and an ongoing commitment to delivering a relevant, informative and innovative programme of events and other CPD activities.

Close to 25,000 delegates are expected to attend our events this year, with a growing number of specialist events for paraplanners, Chartered professionals, financial planners and members of the Society of Mortgage Professionals.

VA LUA B L E FEEDBACK I want to thank all of you who responded to our recent member survey, as your feedback is incredibly valuable in helping us evolve and improve our offering and value to all members.

We were delighted by the improved level of member satisfaction but understand that there remain important areas of improvement.

Your feedback will help shape our strategy and ensure we continue on the path of continuously evolving and improving our member services. ●

ILLUS

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For more information and to offer your feedback, please visit:

PFS member email: [email protected] finance festival: www.thepfs.org/2017festivalScamSmart: www.thepfs.org/scamsApprenticeships: www.thepfs.org/Apprenticeships

BUILDI N G MOM EN TU M

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N E W S N E W S

MEMBER SURVEY

PFS SURVEY REVEALS BULLISH EMPLOYMENT PROSPECTS IN FINANCIAL ADVICEMore than three quarters of financial advice firms are considering taking on additional staff in the next few years, according to a Personal Finance Society (PFS) survey.

The professional body’s 2016 member survey found that 46% of firms have plans to take on additional staff during the next one to three years, with an additional 30% saying they are uncertain but may consider boosting their workforce in that timeframe.

Less than one quarter of respondents to the survey said they did not have any plans to take on more staff in the near term (24%).

While the results indicate a strong intention to hire, the

@sharonsutton99@BBCRadio4 @Moneybox good to hear

from @pfsconf CEO Keith Richards about the value of advice in building consumer

confidence and trust

@JerseyFSCThanks to @pfsconf for partnering

with us. Their commitment demonstrates our shared concern

#yourownbestinterests

@snowbirdieHere @pfsconf Personal Finance

Society Regional Officers Conference in #Leeds... exciting new initiatives for our

members to get involved in

@capital_tweetsWe are thrilled to congratulate Capital’s @mediamagnus on

becoming a Chartered Fellow of the @pfsconf #personalfinance

@pensionsdog@pfsconf here in Woking for the Q1 #pfssry – my first as Regional

Chair – great agenda and feedback on the sessions

@AlanJLSmith@perceptiveplan @AbrahamOnMoney

Have you looked at @pfsconf apprenticeship? high quality candidates and £contribution to training from HMG

T H E N E W S I N N U M B E R S

£1,000additional incentive available for any size business enrolling an existing or new employee aged under 19 into the Aspire

development programme

£9,600 now offered by the Department for Education to contribute towards a

financial adviser apprenticeship

22% of firms surveyed by the PFS

said a lack of talent and skilled trainees is a major threat to the

success of their business

T w e e tT a l k

PFS President’s Thinktank 3,887 membersPFS Chartered Financial Planners 1,675 members@pfsconf 5,734 followers

200PFS members have now signed

up to the campaign against cold callers and scammers

SPRING 2017 | Personal Finance Professional | thepfs.orgthepfs.org | Personal Finance Professional | SPRING 2017

REGIONAL COMMITTEES

REGIONAL OFFICERS JOIN THE SOCIETYA new and expanded group of regional officers has been formally welcomed to the Personal Finance Society’s (PFS) network of regional committees across the UK.

More than 100 regional officers, PFS staff and board members congregated at Oulton Hall near Leeds on 1 February, to formally recognise the contribution made by volunteers who support PFS activities at a local level each year.

The annual Officers’ Conference also offered an opportunity for regional committees to discuss their plans for the year ahead, to network and to engage with a range of key speakers.

Nine new chairpeople have been elected to lead their regions this year, with a growing group of close to 150 education officers, membership officers, Chartered Champions and committee members lending their support in the year ahead.

PFS chief executive Keith Richards opened the conference by offering an overview of recent activities,

as well as explaining the Chartered Insurance Institute’s recently launched Strategic Manifesto.

Former hostage negotiator Richard Mullender shared his tips on how best to listen and engage in insightful and meaningful conversation, while officers had an opportunity to network and celebrate various award winners at a dinner reception in the evening.

Each year, regional officers volunteer their time to support the Society’s events, CPD and other activities in 26 regions across the UK. They are an essential resource for assisting members at a local level and for maintaining the future growth and professional standing of the PFS.

To get in touch with a member of your local committee please visit: bit.ly/2lHSeuPRegional Chairperson Award Winners – 2016Q1: David Philips – Staffordshire and ShropshireQ2: Neil Dickey – Northern IrelandQ3: Kelvyn Hatch – South WalesQ4: Angus Mackintosh – North Scotland

TECHNOLOGY

NEW PLATFORM TO HELP ADVISERSA new technology platform designed to enable financial advisers to serve their clients quicker and more efficiently than ever before has now

launched nationwide.Using state-of-the art bespoke

technology, the Smart365 SaaS platform aims to shake up the sector by simplifying the way advisers work, through a series of real-time applications that will allow them to manage their clients’ finances more effectively.

Smartr365 has been created by some of the sharpest minds in finance, and supported by industry giants including E-Conveyancer and Hometrack, along with two of the big four banks.

CEO Conor Murphy said: “Smartr365 will enable advisers to give smarter financial advice and grow their business at a much quicker rate. It’s all about empowerment through technology. Smartr365 is shaking up the world of financial advice.”

Through Smartr365, advisers will be more productive and profitable, while at the same time being an even better adviser by having real-time access to key and comprehensive information.

LEARNING AND DEVELOPMENT

PFS LAUNCHES ASPIRE PROGRAMME The Personal Finance Society (PFS) has launched a new financial adviser development programme, offering wide-ranging support to employers of aspiring financial advisers across the UK.

Comprising a combination of apprenticeship funding and Personal Finance Society sponsorship, Aspire will involve a structured training programme lasting 18 months, during which participants will achieve the necessary qualifications and skills required to become a fully qualified financial adviser.

All six diploma exams (R01-R06) are included in the programme, as well as all support material including textbooks and remote learning support. Regional exam revision sessions will be made available to all participants, as well as soft skills workshops delivered by an accredited trainer.

Aspire’s launch follows the development of the new financial adviser apprenticeship standard, which was sponsored by the PFS and approved by the Department for Education in November.

Aspire is available to any employed member of staff who works a minimum 30 hours per week, with additional assistance available for firms seeking to employ new recruits into the programme. The programme is currently available for employees based in England, while policy clarification is sought for apprenticeship funding in the devolved regions.

An employer contribution of £900 will be required for staff aged 19 or older, but for firms with less than 50 employees

where the starting age is less than 19, no contribution is required. There is an additional £1,000 incentive available for any size business enrolling an existing or new employee aged less than 19 into the programme. Apprenticeship levy-paying employers will not be required to make any contribution as they will draw down from their funds in their digital account.

The PFS is currently seeking indicative interest from employers as it develops a regional programme of events and training in support of the programme. Registrations of interest can be made by contacting: [email protected]

For more details and information visit: www.fwdtraining.com/pfs

survey also revealed that a lack of new talent remains a major concern within the profession. More than one in five respondents (22%) said a lack of talent and skilled trainees was a major threat to the success of their business during the next one to three years.

The Department for Education approved the new specialist financial adviser apprenticeship standard in November, offering employers up to £9,600 in financial assistance to contribute towards the development of a competent financial adviser.

More than 1,600 PFS members responded to the professional body’s 2016 member survey, which was conducted between 11 October and 8 November, and asked a series of questions about PFS services and the general business and economic environment.

For full details on the findings turn to page 36.

46% OF FIRMS HAVE PLANS TO TAKE ON ADDITIONA L STAFF DURING THE NEXT ONE TO THREE YEARS

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N E W S N E W S

F INANCIAL CONDUCT AUTHORITY

ENFORCEMENT DECISION-MAKING POLICY UPDATEThe Financial Conduct Authority (FCA) and Prudential Regulation Authority have published policy changes on their enforcement decision-making processes.

The FCA said the existing enforcement process has too often proved itself to be unjustifiably regulator-friendly and rising fines have increasingly meant firms and individuals have felt pressure to settle at the earliest possible stage for a 30% settlement discount, often jettisoning strong legal arguments that could have been made in their defence in order to achieve settlement within the 28-day Stage 1 deadline.

Firms and individuals will now be able to secure a substantial settlement discount despite continuing to contest key aspects of their case with the regulator before

the Regulatory Decisions Committee (RDC), due to the introduction of Focused Resolution Agreements

The 30% discount for settling within Stage 1 will remain; but in addition, firms can retain the right to:

1. A 30% discount if the facts and breach are agreed, with only the penalty contested

2. A 15%-30% discount even if both liability and penalty are contested (the amount of the discount will depend upon on how many aspects of the case are agreed with the FCA).

The policy statement also makes it clear that starting investigations with a pre-determined view of the likely outcome will not be acceptable in the new world.

Polly James, a partner at Berwin Leighton Paisner,

commented: “We have been waiting in hope (rather than expectation) to see some constructive changes to the FCA enforcement process that would make it feel less heavily stacked in favour of the regulator.

“The structural advantages built into the existing enforcement process have given the FCA an unhealthy degree of power, allowing it to benefit from the rising pressure upon firms and individuals (as fines have risen) to settle at the earliest possible stage in return for a 30% settlement discount. The strong and increasing trend for cases to settle at the earliest stage has come at the cost of fair and consistent outcomes for firms and individuals who have been subject to enforcement investigations.”

EVENTS

CHARTERED BREAKFASTS TO FOCUS ON ESTATE PLANNINGDuring March, a series of Chartered breakfast CPD events will be held across the country, with subject matter experts from local legal firms presenting on a range of probate and estate planning techniques. These breakfasts offer an excellent opportunity for Chartered Financial Planners to gain essential CPD on important technical subjects, while providing an opportunity to

network with their peers and other local professionals.• Tyne Tees – Ramside Hall Hotel 7 March• Manchester – Lancashire County Cricket Club 8 March• Brighton – The Amex 13 March• London – CII Great Hall 16 March• Belfast – Hilton Templepatrick 21 March• Bristol – Double Tree City Centre 23 March

Registration opens at 07.45, with the 45-minute session commencing at 08.15.

The same venues are also playing host to Society of Mortgage Professionals roadshows from 9.30, where

members can understand the latest developments and opportunities in the mortgage and protection markets.

Visit: thepfs.org/events for more information about these events and to reserve your free place.

SPRING 2017 | Personal Finance Professional | thepfs.orgthepfs.org | Personal Finance Professional | SPRING 2017

PFS LINKEDIN GROUP S

PFS PRESIDENT’S THINKTANKWhat will Pension Dashboards mean for consumers, employers, advisers and pension providers?Pension Dashboards will make an unprecedented amount of information on employees’ pension schemes available, both from their current employers and other pension savings. How will this change how consumers see their savings?http://bit.ly/2kXH9I3

Is the U-shaped expenditure pattern in retirement a myth or valid for our clients?Abraham Okusanya’s latest blog suggests that the U-shaped expenditure pattern in retirement is a myth. It may be so if using the whole population as a dataset, but can the same be said if you just consider the typical (wealthier) client advised by most financial planners?http://bit.ly/2lt0lKU

Would you like to be a Personal Finance Society member director?The Personal Finance Society is looking for two member directors to serve on its board. http://bit.ly/2lvwGBC

PFS CHARTERED FINANCIAL PLANNERS:Widow’s pension annuityI’m trying to get a quote for a widow to purchase an annuity with the death benefits of a personal pension plan. Thing is, she’s currently aged 45 – anyone know someone who will quote?http://bit.ly/2k7EcFA

UK resident working in Dubai for three years – pension and life cover implicationsIs there anything I’m missing here? Could anyone recommend any possible offshore alternatives? Am I missing any key advice issues?http://bit.ly/2kr75si

PFS SYMPOSIUMS

LONDON PENALTY SHOOTOUT PRIZE DRAW WINNERSDelegates at November’s Wembley Symposium had the opportunity to enter our penalty shootout competition, coached by goalkeeping legend Peter Shilton. Our academy handball goalie, Adam Woodage, did a sterling job, facing more than 600 shots throughout the day. Everyone that had a go was entered into a prize draw, with some tasty tech treats up for grabs. The winners were:

REGULATION

SOCIETY JOINS FORCES WITH JERSEY REGULATOR TO RAISE CONSUMER AWARENESS OF INVESTMENT RISKA major advertising campaign aired in Jersey on 16 January, in an effort to get consumers to think carefully about risk before committing to investments. The campaign, the first of its kind from the Jersey Financial Services Commission (JFSC), comes in response to a growing number of Islanders losing some or all of their life savings in

high risk and often unregulated investment schemes and scams.

The Personal Finance Society (PFS) is partnering the JFSC on the campaign, both to help consumers make better informed financial decisions, but also to demonstrate the value of professional financial advice. With interest rates so low, many investors

feel under pressure to make their money work harder, but seeking higher returns can often increase the risk of loss. Investors are being urged to think carefully before committing to investments and act in their own best interests. As part of a balanced message, the JFSC is stressing that the majority of professional financial advisers on the Island give appropriate and suitable advice that can be relied upon.

PFS chief executive Keith Richards joined John Harris, JFSC director general, in a series of TV and radio interviews as part of the campaign’s press launch. The campaign will run across TV, radio, local press and social media for six weeks initially, with the potential to extend.

Mr Richards said: “We are working in partnership with the JSFC on this key consumer awareness campaign to help people make better informed financial decisions. With interest rates so low, many investors feel under pressure to make their money work harder. But seeking higher returns can often increase the risk of loss. Coupled with a dramatic rise in sophisticated investment scams, it is essential for consumers to think carefully before committing to any investment opportunity and, where possible, seek professional financial advice.”

For more information about the campaign visit: jerseyfsc.org/yourownbestinterests

Ade Babatunde from Master Adviser – won an iPad Pro tabletNeil Manners from Yours Financially – won a FitBit Blaze fitness watchJason Rolf from Amati Global Investors – won an Amazon EchoHaresh Raghwani from Hale and Company – won one of the Symposium-branded footballsCongratulations to our winners!

M E M B E R S H I P S C A M S M A RT

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Spring 2017 | Personal Finance Professional | thepfs.orgthepfs.org | Personal Finance Professional |Spring 2017

TAKE THE TIME TO CHECK INVESTMENTS ARE LEGITIMATEThe FCA conducted a YouGov poll of 1 ,000 people aged 55 and over. Here’s what they found.. .

3 2 % of over 75s

2 2 % of over 55s

55%made the decison to invest

in a financial product without consulting family

27%

£ 32 ,0 0 0

R E GU LATORY & POLITICAL OPINION

CO NSUME R OPIN ION & TRUST

CONSUMER OPINION & TRUSTCONTINUED...SPHERE OF INFLUENCE

Over the last couple of years the Personal Finance S ociet y has been actively pursuing initiatives that directly influence both regulatory & polit ical opinion

and consumer opinion & trust in the financial planning sector.

Trade press comments

and articles

430per annum – regular high level meetings [FCA, HM Treasury, HMRC & DWP]

25

National press comments and

articles

Citizens Advice – MoneyPlan pro bono initiative – 200

adviser volunteers active in local Citizens Advice offices

minute per month ScamSmart commitment – 200 members

signed–up so far

Jersey Financial Services Commission – consumer

awareness campaign 41,500 leaflet drops to every home

in Jersey

Various advertising and public profile building initiatives – three

million ITV viewers = reach of recent banner adverts at the

recent Italy v Wales 6 Nations rugby game

consumers receiving pro bono MoneyPlan

guidance per year [England & Wales]

Personal Finance Awards – five new press

categories for 2016

205200

15

41,500

3m

1,110

Regulatory workgroups – Many of the 20 workstreams

coming out of FAMR

20Formal

consultation submissions

1037,500

members5,700

Twitter followers20,224Profile Visits

324,783Tweet Impressions

£

£believe they have been targeted by an investment scam in the last three years

avera ge vict ims l ost £32 ,0 0 0 ea ch to invest ment fraud l ast year

sought professional, imparial advice before investing

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C O M P L I A N C E C O M P L I A N C E

With MiFID I I set to come into play in less than a year, Rory Percival outlines the areas of change

and highlights the need to begin planning

means in practice; for example, the review needs to representative of products in the market in question (although this in itself begs questions). Also, you will not need to assess every single product available but you should be in a position to advise on all products within the scope of the market on which you provide advice. This seems fairly pragmatic to me – you will not need to assess every product in detail but must be able to analyse and advise if necessary; for example, if a client asks you about a particular investment you need to be able to research and advise on it.

In practice, if you are operating independently now and are happy with the way you operate, you will not need to change to meet the new rule.

SUITA B IL ITYWith two exceptions, there are no fundamental changes on suitability but the new rules enshrine a

The Markets in Financial Instruments Directive II (MiFID II) comes into effect on 3 January 2018 (and do not think the Brexit vote means it will not). It forms the bedrock of regulation that applies to advisers as well as providers. Hence, most

of the activities you undertake will be regulated by this new directive.

Activities covered include:● Inducements● Adviser charging● Client categorisation● Disclosure● Independence● Suitability● Appropriateness● Best execution● Product governance● Knowledge and competence● Taping.

DON’T BE MIFFED BY MiFID

It is beyond the scope of one article to cover all these issues but this piece will flag up some of the main areas that need to be considered.

DISCLOSUREAdviser charging rules remain fundamentally the same but there are some changes to disclosure. There will be a requirement to provide clients with aggregated cost disclosure (ie adding up all adviser and investment solution charges) and also to provide this on an ongoing basis. The firm will also need to provide the client with a breakdown on request.

I suggest that firms incorporate a simple table in their suitability reports, with a line for the cost of each constituent part (platform, product, adviser etc) and an overall total. And then to disclose each of these costs and the total in both percentage and pound terms. This table should then be provided again as part of the review service, with the figures updated.

INDEPENDENCEThe independence rule is changing materially. There are changes to what I would refer to as ‘breadth’ and ‘depth’.

Breadth: you will no longer be required to provide advice on all retail investment products. You can limit the product types you provide advice on and still be independent. So, for example, you can be an ‘independent pensions adviser’.

Depth: a ‘comprehensive review’ of the market is being replaced with a review that is “sufficiently diverse in… providers to ensure the client’s objectives can be suitably met”.

There is some assistance regarding what this

In practice, if you are operating independently now and are happy with the way you operate, you will not need to change to meet the new rule

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lot of existing guidance and expectations into rules. For example, you need to:● Assess suitability of the overall package if a

portfolio of investments is recommended;● Check the reliability of client information;● Keep ‘know your client’ information up to date if

providing ongoing advice;● For replacement business, collect and analyse

information on existing arrangements (costs and benefits).

The two main changes are:● Suitability should be assessed when

recommending to buy, hold or sell. At the moment, there is only a requirement to assess suitability when buying or selling. This will have an impact on your record keeping at both initial and ongoing advice stages.

● If you use aids such as a risk-profiling tool, then you must ensure they are fit for purpose. This will be an additional step that you need to take.

PRODUCT GOVERNA NCEThis is another big area of change and a new rule book – PROD – which, despite the name, has implications for advisers. One area of challenge is the rule that advisers must provide information on sales to the manufacturer of each financial instrument it distributes. This is a new requirement and there are many questions about how this will operate. This is one to watch.

TA PINGYou will probably have seen the press coverage already on the requirement for advisers to record telephone conversations with clients. The Financial Conduct Authority (FCA) has openly invited alternative ways of mitigating the risks.

STA RT PL A NNINGI have referred to rules here but at this stage it is all in draft, having been subject to consultation. The FCA is due to publish the Policy Statement with final rules in Q2/17. In the meantime, I encourage firms to start thinking about the implications for them and at least have an outline project plan for making the changes, to put into effect when the final rules are published.

The extent of the material to work through is significant and there is a lot of detail. It is also complicated, with the rules applying to some areas and firms but not others. It would therefore make sense to seek help from compliance consultants or other sources. ●

Rory Percival of Rory Percival Training and Consultancy

B R E X I T B R E X I T

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STAND BACK FROM THE EDGE In its latest member survey, the CII

warns against the Brexit ‘cl iff edge’ as confidence in the UK economy plummets across the insurance profession. Lawrence Finkle reports

Cometh the hour, cometh the plan. After months of “Brexit means Brexit” and “red, white and blue Brexit” soundbites, on 17 January 2017 Theresa May finally revealed her government’s Brexit

blueprint – 12 negotiating priorities and four key principles driving them, ahead of divorce talks with the EU that are set to commence by 31 March.

Although the speech contained few genuine surprises, it was nonetheless the first substantial disclosure of

CII statement in response to the Prime Minister’s speech of 17 January;

Our report warns of a widening wall of nervousness forming among businesses and professionals on the impact of leaving the EU. Economic confidence across the insurance profession is at its lowest level since 2011 and nearly half (48%) of those working in insurance expect the economy to deteriorate in 2017.

Today’s speech by the Prime Minister about forging a new UK-EU partnership put “building certainty where we can” as principle number one; we think her final objective of asking for a “phased implementation” period following negotiations seems to partly deliver that.

Although the government has not offered the defined transitional period that we were asking for, it has acknowledged the risk of an economic and legal “cliff edge” and the

impact it could have, and proposed a “phased period of implementation” to give firms that much needed breathing space to consider what the new EU-UK partnership could mean for them. However, she neglected to mention anything about time limits.

On balance, Theresa May’s speech today seems to be a step in the right direction to offer the market much of the certainty she seems to hold dear.

C I I S TAT E M E N T

Brexit survey – highlighting a dramatic fall in confidence in the future of the UK economy throughout the insurance and financial planning profession. Economic and business confidence of the CII membership has dropped off a ‘cliff edge’ (see Figure 1) to the lowest levels since 2012 – the greatest one-year fall since records were first collected.

The figures are stark: almost half (48%) of members surveyed at the end of 2016 expect the UK economy to deteriorate during the next 12 months, nearly 10 times higher than a year previously (5%). Only 23% of members expect the economy to improve in 2017 – a significant reduction from 67% only 12 months earlier. Worryingly, in the context of the government’s approach to engagement with sectors critical to the functioning of the economy, Figure 2 makes clear that nearly half (45%) of CII members surveyed are not confident that insurance and financial planning will be well represented in negotiations to leave the EU.

Unlike other economic temperature checks conducted elsewhere since the referendum – at manager, director and chief executive level – this survey, with almost 4,000 respondents, expresses sentiment present at all levels of seniority – from junior staff to established senior leaders. It is not simply a City of London concern either: only 25% of members surveyed work in the capital.

Perhaps this sharp downturn in economic and business confidence was unsurprising, when set against the backdrop of unprecedented political turmoil at home, on the continent and across the Atlantic described elsewhere in the report. But until the Prime Minister’s speech of 17 January, had the government done enough to mitigate the uncertainty that has clearly clouded the faith of CII members in the future of the UK macroeconomy?

It is no coincidence that CII members attached by far the greatest priority to ‘general economic

F I G U R E 2 :

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In terms of employment, members did not appear to be particularly worried about their firms’ recruitment prospects following Brexit. Over two-thirds (68%) said the UK’s decision to leave the EU will make no difference to their firms’ appeal to recruit the skills they need. 16% thought the decision will decrease their firms’ appeal, 4% thought it would be beneficial to their appeal, and 12% did not know.

While most respondents appear unaffected by Brexit in terms of recruitment, the industry still employs a reasonable share of its skills from abroad. Across the UK, over 11% of the insurance and finance service workforce consist of foreign nationals, 7% of which are from the EU.

Clearly, as negotiations unfold, insurance professionals are very attentive of the way the sector will be affected. As yet, our survey implies most firms have not made up their minds as to how to react to these implications. In particular, investment decisions are largely unaffected.

Going forward, the representation of the insurance sector in negotiations is of central importance to CII members.

When asked about how confident members are that the interests of the insurance and financial sector will be well represented, the results were a mixed picture: 9% were ‘very confident’ such interests would be represented, 36% were ‘confident’, but 45% were not confident in their representation.

While most members appear to be relatively unaffected in terms of their own firms’ investment and recruitment, clearly Brexit has had a significant effect on their attitudes towards the wider economy. The priority CII members place upon the exit arrangements underlines the critical importance of effective negotiations as the UK leaves the Union. The sharp downturn in confidence for the year ahead, illustrated in the falling business and economic indices, highlights this further.

Figure 18: How confident are you that the interests of the UK insurance and financial planning sector will be well represented in negotiations to leave the EU?

50%40%30%20%10%0%

Not confident

Confident

Very confident

I don’t know

Source: CII, Cebr analysis

45.1%

36%

8.8%

10.1%

Referendum not expected to affect members’ recruitment

How confident are you that the interests of the UK insurance and financial planning sector will be well represented in negotiations to leave the EU?

F I G U R E 1 :

4 Executive Summary Continued

1According to research from Cebr (2016), in 2014 exports to the EU contributed £187 billion to the UK economy – 10.3% of UK GDP

Figure 1: CII Economic, Business and Employment Prospects Indices, 2011–16

CII Economic prospects Index CII Business prospects Index CII Employment prospects Index

40

30

20

10

0

-10

-20

2011 2012 2013 2014 2015 2016

Source: CII Cebr analysis

CII Economic, Business and Employment Prospects Indices, 2011–16

certainty for planning’, ‘the UK government’s full appreciation of the needs of the insurance and financial planning sector’, and ‘securing a transitional arrangement between leaving the EU and what replaces it to ensure business continuity’ as objectives for their firm and the sector, when approaching negotiations (see Figure 3). It is particularly the desire for ‘general economic certainty for future planning’ that unites the profession.

VOID OF UNCERTA INTYThose who have examined the off-the-cuff remarks and personal musings of ministers may have managed to construct a vague outline of the government’s direction of travel, but to the public and much of the business community this lack of a defined negotiating position has formed a gaping void of uncertainty. The divergence between business and economic outlook for the whole economy as demonstrated in Figure 1 would suggest that CII members have more faith in their own firm to navigate this uncertainty than they do in the direction of the wider economy. Interestingly, as illustrated in Figure 4, it is financial advisers who are the most optimistic about the prospects for their business during the coming year, with only 9% expecting them to deteriorate – a sharp contrast to 37% of members working in Lloyd’s and the London market.

what the government is seeking to achieve in the negotiations. That the Prime Minister made the provision of certainty “where possible” her number one objective was recognition that the days of insisting there would be “no running commentary” or “no cards on the table” could no longer continue.

CII SURVEYThis greater clarity was long overdue and welcome. As the Prime Minister was set to deliver her much anticipated keynote speech, the Chartered Insurance Institute (CII) published the results from its Economic outlook and

At the CII, we voiced major concerns over what this drop in economic confidence across the insurance and financial planning sector could mean for the consumer, and questioned the government’s decision to refrain from making any substantial disclosure on the UK’s negotiating objectives so far. We called on Ms May to make an early commitment to a transition arrangement that would bridge the transfer from the end of the UK’s membership of the EU to its new trading relationship outside of the bloc, to provide the conditions for as much business continuity as possible for the sector. ↘

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With introduction of the Lifetime ISA recently confirmed in the Autumn

Statement, Technical Connection’s John Woolley and Niki Patel look at

the potential benefits for homebuyers and savers

n the run up to the 2016 Budget, there was considerable speculation in the financial press about forthcoming tax changes, which mainly centred around pensions. This arose as a result of an earlier report, which estimated the cost of pension tax reliefs to be in the region of £35bn per annum –

with most of this tax relief going to higher and additional rate taxpayers. The report put forward alternatives of moving to a system of flat-rate relief on pension contributions, or a system whereby no tax relief was given on contributions but benefits were completely tax free.

As it happened, the then Chancellor, George Osborne, made no announcements on pension tax reliefs in the Budget, but he did announce that the lifetime individual savings account (LISA) would become available from 6 April 2017. At the time, many considered this could be the ILLUSTRATIONS: VALERO DOVAL

MORE THAN

JUST AN ISA

L ISA – THE GENERA L RUL ESA LISA can be opened by a UK resident who is aged between 18 and 40 and any savings put in before their 50th birthday will attract a government bonus. It will be possible to save up to £4,000 in each tax year, with the added benefit of the government providing a 25% bonus on the contributions paid in a tax year. This means that where the maximum saving of £4,000 has been made, the government bonus will equate to £1,000 – bringing the amount invested up to £5,000 in the first and subsequent years. This is subject to the overall annual ISA subscription limit of £20,000 applicable from 6 April 2017.

So, theoretically, someone who opens an account aged 18 and keeps it until age 50 will be able to secure lifetime savings of up to £160,000 (ie £128,000 saved by them and £32,000 in government bonuses). At age 50, permitted

blueprint for pension plans going forward – assuming the current pension tax relief system is eventually changed.

Of course, 2016 was a turbulent year politically and, as a result, there were concerns that the introduction of the LISA would be shelved. However, the publication of the Savings Bill in September and the subsequent Autumn Statement confirmed that, with effect from 6 April 2017, the LISA will become the fifth type of ISA, joining the general ISA, the innovative finance ISA, the help-to-buy ISA and the junior ISA. Due to the administrative and compliance issues involved, however, at present it is unclear how many providers will be ready to offer a LISA from 6 April 2017.

In this article we consider what the LISA is, how it may be used and its merits when compared to a registered pension plan and a help-to-buy ISA. ↘

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25% government bonus on the full value of the transferred funds.

The attractions of a LISA to an investor under age 40 will depend on the circumstances and requirements of that investor. It will clearly be attractive for the would-be first-time buyer who is under age 40.

It may also be attractive for someone who wishes to save until age 60 - but in the knowledge that if all else fails they can access their money earlier - albeit suffering a 25% penalty on the amount encashed. Here, a LISA will act as an alternative or a supplement to a pension.

Funds can be invested in cash or stocks and shares. Clearly, where the investment should be made will depend on the investor’s intentions and objectives. In broad terms, those intending to invest for less than five years should invest in cash, those saving for between five and 10 years should look at multi-asset and anyone saving for longer than 10 years should be looking to invest in equities.

There will also be those who cannot afford substantial investments now but may well be able to in a year or so. For them, opening a LISA for a nominal sum so they can add to it later may be advisable.

Given the design of the LISA, it is thought most investors would open it to help buy a first house or fund retirement provision.

We now compare both in more detail.

HOUSE P URCHASE Here, the LISA will be an alternative to the help-to-buy ISA.

The help-to-buy ISA is a cash-based ISA designed specifically for those who are aged 16 or over and want help with buying their own house. Such people must not have an ‘active’ cash ISA but can transfer up to £1,200 from a previous cash ISA to the help-to-buy ISA at inception.

The government bonus is 25% of the amount paid to the

contributions can continue but the government bonus will cease.

The bonus will be added monthly from April 2018. For contributions made in 2017/2018, the bonus will be added sometime after 6 April 2018.

It will also be possible for savers to open more than one LISA in their lifetime, but they will only be able to pay into one LISA in a tax year – thus, the rules are similar to those for the general ISA.

The purpose of the LISA is to encourage people to save money and use the funds to buy a residential property as a first-time buyer or to provide a means of saving for retirement from age 60. Encashments in these circumstances will not incur a penalty. While funds remain invested, any interest and investment growth will be tax free.

US E OF LISA FUNDSTax-free funds, including the government bonus, can therefore be used to buy a first home worth up to £450,000 at any time from 12 months after opening the account. If the house is being bought with someone else, both purchasers can use a LISA and each will benefit from the government bonus. The rules are largely based on the rules applicable for the help-to-buy ISA, so any withdrawal must be used to purchase a first property – and the withdrawal together with the government bonus will be paid directly to the conveyancer.

Any funds which are not used to buy a first property can be rolled forward and, if encashed after age 60, will not incur a penalty. LISA holders will be able to access their savings if they become terminally ill. If encashment is made in any other circumstances, an encashment penalty of 25% will apply, except on encashment before 6 April 2018 because no bonus will have been added at that time.

For inheritance tax (IHT) purposes, a LISA will have the same treatment as other ISAs. So, on the saver’s death, the funds will form part of the deceased’s estate for IHT purposes. Therefore, a surviving spouse/civil partner of a deceased LISA holder will also be able to invest as much into their own LISA as the value of the deceased spouse’s/civil partner’s on top of their usual allowance. However, the bonus will only be paid on contributions up to a maximum of £4,000 per annum.

LISA managers will claim the bonuses due on the accounts they manage from HMRC, which will pay valid bonus claims (up to a maximum of £1,000 per person per tax year).

Individuals will be able to transfer savings from other ISAs as a way of funding their LISA. In line with existing rules, transfers from previous years’ ISA contributions will not affect the £20,000 overall ISA limit. During 2017/2018 only, those who already have a help-to-buy ISA will be able to transfer any funds (including interest) built up before 6 April 2017 into a LISA without these counting towards the LISA contribution limit. They will receive a

help-to-buy ISA plus interest, but none will be paid unless there is at least £1,600 in the account. The maximum bonus is £3,000.

The bonus is not paid until the money in the help-to-buy ISA is used towards buying a qualifying property. The bonus is only paid where the money in the help-to-buy ISA is used to buy a home, in which the investor will live, costing up to £450,000 in London or £250,000 outside London, and it must be bought with the aid of a mortgage.

Up to £200 per month can be paid into a help-to-buy ISA, but in the month it is opened an extra £1,000 can be paid. Payments can continue into the account even when the maximum bonus has been earned.

L ISA OR HEL P -TO- B UY ISA?For those saving for their first home, there is now a choice to be made between the LISA and the help-to-buy ISA, though the latter will close to new savers on 30 November 2019 and will only be open to new contributions until 2029, making it a shorter-term option.

Both offer a 25% government bonus for those buying a home. However, while up to £4,000 can be invested annually in a LISA, attracting a top-up of £1,000, the help-to-buy ISA only allows an annual saving of £2,400 and attracts a government bonus of £600 a year. When the account is first opened, savers can deposit a lump sum of £1,000, which will attract a government bonus of

Lifetime ISA Help-to-buy ISA

Availabilit y 6 April 2017 onwardsFrom 1 December 2015 to 30 November 2019

Eligibil it y Savers have to be UK resident and aged between 18 and 40 Available to first-time buyers aged 16 or over who are UK resident

Aim of the product To help save for a first home or retirement To help first-time buyers save to buy their first home

Type of ISA Cash/stocks and shares Cash

Individual contributionMaximum of £4,000 a year – no monthly cap – until the

saver turns 60. Max over a lifetime £168,000 (ie from age 18-60)

£200 a month, plus a further £1,000 on account opening up to a maximum limit of £12,000

Government bonus25% on contributions made up to age 50

25%

Max government bonus £1,000 a year from age 18 until the saver turns age 50 (ie a cap of £32,000) £3,000 in total

Bonus paid Monthly from 6 April 2018. One payment after 6 April 2018 for contributions in 2017/2018 When the saver purchases a home

Max time account can be open and contributed to

Savers can open an account if aged 18-40 but the bonus will only be paid on contributions made until they attain

50 – so a maximum of 32 years’ contributions

Until the account balance reaches £12,000 (including interest). This would take a minimum of four years and

seven months of contributions, excluding interest. Accounts can be opened until 30 November 2019 and

contributed to until 2029

Maximum propert y value your savings can be used to buy

£450,000 – restricted to UK residential property £250,000 outside London rising to £450,000 in London to qualify for the bonus

Transfers in from existing ISA Yes No

Full withdrawal conditions

Initial minimum holding period of 12 months from account opening before withdrawals, that include the

government bonus, can be made for a home purchase. If used for a home purchase, withdrawal must be paid to

conveyancer. Where people are diagnosed with terminal ill health, they will be able to withdraw the funds with no

encashment penalty

Money can be withdrawn at any time but cannot be replaced straight away. For example, if £200 is deposited and £50 is withdrawn in the same month another deposit

can only be made in a following month.

Partial withdrawal conditions of money not used for permitted

purpose

25% penalty on amount encashed after 5 April 2018 No penalty but loss of bonus

TA B L E 1 : GIVES A QUICK COMPA RISON B ETW EEN THE L IFETIME ISA A ND THE HELP -TO-BUY ISA


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£250, meaning the bonus from the first year of saving could be worth up to £850.

The help-to-buy ISA has a bonus cap of £3,000, while the LISA steadily attracts an annual bonus of up to £1,000 every year for anyone between the age of 18 and 50 – so potentially £32,000 for the saver who starts their plan at age 18.

There are also differences between the value of eligible properties – the help-to-buy ISA allows the investor to purchase a house valued at up to £250,000 outside London and up to £450,000 inside London. The LISA caps property values at £450,000 across the UK.

If the investor does not buy a property and encashment is made before age 60, the LISA has heavier penalties – 25% on the amount encashed. Under the help-to-buy ISA, the government bonus is lost but there is no penalty charge.

A final key difference is that a LISA can hold stocks and shares along with cash, whereas the help-to-buy ISA can only hold cash. Obviously, anybody investing in a LISA to help with a property purchase may wish to be more cautious and should consider the potential investment term. With both, it will still be possible to hold a stocks and shares ISA account, provided the investor does not breach the annual subscription limit of £20,000 from 6 April 2017. Savers who have both a help-to-buy ISA and a LISA will only be able to use the government bonus from one of their accounts to buy their first house.

During 2017/2018 only, those who have a help-to-buy ISA will be able to transfer the funds into a LISA and receive the government bonus on those savings. Any help-to-buy ISA funds that were saved prior to the introduction of the LISA on 6 April 2017 will not count towards the LISA annual contribution limit. Contributions made after this point to the help-to-buy ISA and transferred across will count against the annual contribution limit.

Table one, on the previous page, gives a quick comparison between the two routes.

PE N S ION VS LISAIn deciding whether a pension plan or LISA is the best way of funding for retirement, the tax position is a key determinant. Like private pensions, the LISA grows tax free. It also has the advantage of being completely tax free if you encash it after age 60. With a pension, 75% of the value is taxable on encashment. In this context, it is useful to consider how much a saver would have to put into a LISA or private pensions to generate £100 of savings after any tax on encashment. The calculations (which assume no charges) need to account for up-front tax relief, savings bonuses and any tax deducted on encashment.

For a LISA, the sums are simple. It costs £80 of after-tax income to generate £100 of savings, thanks to the 25% upfront bonus and the tax freedom on encashment.

For pensions, the sums are more complex. Savers can only take 25% of their funds as tax-free cash in retirement, so a basic rate taxpayer who remains so in retirement

Lifetime ISA Help-to-buy ISA

Eligibil it y UK resident and aged between 18-40Those aged 18 or over and UK resident (also possible for, say, a parent/grandparent to take out a pension plan on behalf of

a child)

Subscriptions/contributions Maximum £4,000 per annum (which forms part of total ISA subscription limit of £20,000 from 6 April 2017)

Maximum £40,000 a year (tapered for those with annual adjusted income of more than £150,000). Lifetime limit of

£1m from 6 April 2016 unless election for protection has been made. Personal contributions must not exceed relevant UK

earnings if an individual contribution

Government top-up/tax reliefGovernment bonus of 25% based on annual subscriptions of up to £4,000 which is added monthly (after April 2018)

on contributions paid until investor reaches age 50

Income tax relief on every contribution at individual’s marginal rate(s) of 20%, 40% or 45%. Basic rate tax relief

given at source – HMRC pays this to the provider

Grow th Can be invested in cash or stocks and shares, or a mixture of each

Tax-free fund, which can be invested in a variety of investments – usually cash, equities, fixed interest deposits/

funds, collectives and commercial property

Tax on fundGrowth and withdrawals are tax free if:

Proceeds are used for first-time house purchase; orencashment is made at age 60 or over

Growth is tax free. On withdrawals, 25% can be taken as a tax-free lump sum. The remainder may be subject to income

tax, depending on how it is taken

Flexibilit y

Encashments from fund are tax free from age 60, in cases of terminal illness or where proceeds used to buy a first

home. Outside of this, encashments are subject to a 25% penalty after the first year (from 6 April 2018 onwards)

Cannot usually be accessed until age 55 at the earliest, otherwise penalties could apply

IHT Value of LISA is included in investor’s estate for IHT purposes

Value of pension plan is not included in member’s taxable estate for IHT purposes

would need £94 to generate £100-worth of savings after all taxes are taken into account.

This is on the basis that the saver would get an extra £23.50 added to the plan by the government in the shape of 20% tax relief. On encashment of the plan worth £117.50, £29.40 would be tax free, with the balance of £88.10 being taxed at 20% – leaving £70.50. So the investor would be left with virtually £100.

For a higher rate taxpayer staying on the same higher rate in retirement, the figure is £86.

This is on the basis that the saver would effectively get an extra £57.33 added to the plan in the shape of 40% tax relief. On encashment of a plan worth £143.33, £35.83 would be tax free with the balance of £107.50 being taxed at 40%, leaving £64.50. So the investor would be left with virtually £100.

Therefore, for the ‘retirement saver’, who is under age 40 and a higher rate taxpayer, a pension plan will still appeal – at least under the current rules, especially as access at age 55 is now available without the requirement to purchase an annuity but, of course, 75% of the fund will be taxable – which is not the case with the LISA at age 60.

It is estimated that if a person puts the maximum into a LISA over a 42-year career, they could build a fund of almost £700,000, assuming average growth of 5% a year. They would have contributed £168,000 and received government top-ups worth £32,000 during that time. How does this compare to saving via a pension? If you are paying tax at a higher rate (40% or 45%) but expect to be a lower rate taxpayer when you retire, then the tax relief on a pension is significantly better. Also, you can contribute significantly more to a pension – £40,000 a year (at least until adjusted income exceeds £150,000 a year, at which point the maximum contribution falls until it equals £10,000 a year when adjusted income is £210,000).

The LISA will be a good additional option for pension savers who have already maximised their pension provision because their funds equal the lifetime allowance of £1m (or whatever the protected figure is at the relevant time). The LISA is also a way for higher earners to squirrel away more money for the long run, tax efficiently.

The situation is different for basic rate taxpayers. Those paying basic rate tax today may be better off making additional saving in a LISA, rather than saving in a pension. However, there is a catch. If the investor is an employee, they are likely to have a workplace pension which their employer contributes to. If so, it would not be sensible to opt out and lose the employer contribution. Instead, they should keep the pension and divert any excess long-term savings into a LISA. What is obvious is that anyone under the age of 40 who can afford to save over and above paying into their workplace pension should consider opening a LISA. How they invest the LISA will depend on what they are saving for – a house or a pension.

There are other considerations as well. LISAs are designed to be accessed from age 60 onwards, unless the money is to be used to buy the investor’s first home, while a pension is accessible from age 55. A LISA can be accessed early if needed, albeit with high penalties, but a pension cannot other than in exceptional circumstances. Hence the choice is finely balanced — and the rules may change in the future. Still, overall a LISA looks like a good supplement to a pension, but not a replacement.

Also, as mentioned earlier, a LISA will form part of the investor’s estate for IHT purposes on death. In contrast, pension plans are no longer subject to IHT, although death benefits paid on an investor’s death at age 75 or over may be subject to income tax.

THE BA NK OF M UM A ND DA DThere are not many 18 year olds who can afford to save £4,000 a year, but some may have financially secure parents to help them invest funds in a LISA to access that valuable government bonus. This is an excellent way of implementing intergenerational planning and a good way for parents to use their £3,000 annual IHT exemption and/or the normal expenditure out of income exemption.

See table two for a summary of the main issues to be taken into account in comparing a LISA and a Registered Pension Plan.

THE FUTURE The above comparison assumes that the pension tax relief rules remain the same. This may not be the case. In the Autumn Statement, the government said the new LISA is “one of the most expensive sets of relief offered by the government”. It added: “In 2014/2015, [pension relief] cost around £48bn, with two thirds of the tax relief going to higher rate and additional rate taxpayers.”

There could be changes afoot and investors need to bear this in mind. ●

TA B L E 2 : SUMMA RY OF THE DIFFERENCES OF THE M A IN FEATURES W HEN COM PA RING A L ISA A ND A REGISTERED PENSION PL A N


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Ms Gannon has some concerns for the sector too: “I am the education officer for Plymouth and Cornwall and it worries me beyond belief that, at 44, I am one of the youngest in the room.

“I am so passionate about encouraging people to look at us as a career – people discuss becoming a solicitor or an accountant but they don’t talk about becoming an independent financial advisor. But look at Martin Lewis – people trust him and value financial advice.

“Look at the US, where people can access their stock portfolio on an ATM – we need to change our thinking.”

CHA RTERED FIRM OF THE YEA RThe PFS’s newly named Chartered Financial Planning Firm of the Year, Lift Financial, is proud of its rapid growth in the past few years, now counting some 80 people across its group.

Director Joel Adams says the key to bringing in new people has been its strong ethos of looking ahead and keeping ahead of developments.

For example, when the Retail Distribution Review came along, “it was a complete non-event for the firm”, he says, explaining: “We have always wanted our advisers to be as well qualified as possible. And that is where we want to be when regulatory change happens in the future too.”

He welcomes the move away from product-based commissions to fees as a sensible route forward. And he also sees a fast-changing world ahead as technology increasing plays a part.

“The key will be that we are always providing a service that people want to buy, regardless of the robo options available.

“Machines won’t give them the specialist advice that we can provide but we also have to push the boundaries in terms of our technical ability. We need to embrace technology and to use it as part of our proposition – but as part and not the whole.

“We need to offer something extra that the machines can’t give. For example,” he says, “we need to talk to clients about the whole family plan and not just to them as individuals.”

Being able to offer something different but valuable, with professional standards supporting the push, will be essential if advisers are to grow into the future, he believes. “We also need to be thinking about the next 10 years.”

rive and ambition, as well as a desire to stay ahead of the regulatory curve, is a common thread linking the winners of the Personal Finance Awards. But that is not all about the latest gadget or product offering.

Take Kathryn Gannon, the latest Chartered Financial Planner of the Year. Ms Gannon, who works for Manning and Company, firmly believes that success comes to those prepared to go the extra mile.

“It sounds so trite,” she says, “but it is really a differentiator. It is all about the small things – remembering the children’s birthdays or where they go to school. Remembering a sick relative or other detail that shows you’ve listened. It all says: ‘I care’.

“I don’t call clients ‘clients’ – they are extended family. You hope to have a long-term relationship with these people and to see them through many life adventures.”

PA RA PL A NNER OF THE YEA RThe drive across the sector for professionals does not stop with the adviser. As the newly crowned PFS Paraplanner of the Year, Warren Bentham of 75point3 is a huge advocate of equally professional support teams sitting behind every adviser.

“After all,” he says, “I am almost doing the same job in terms of knowing the client and identifying what is right for them – I just don’t sit in front of them directly as an adviser would.”

Having said that, Mr Bentham does sit in some client meetings and greatly values that experience. “We may do more analysis than the adviser but between us we have to get the right solution for the client.

“People think of paraplanners as report writers, but the true paraplanner is something more,” he stresses.

Key to this are the proper qualifications, he says, but that is not purely about exams. “Qualifications are not the end of the learning process,” he says. “Exams will never be exactly in line with real life. A client will have more detail and you will have to delve deeper to deliver the right solutions.”

For him, as with Ms Gannon and Mr Adams, looking to the future is critically important and a crucial part of that will be embracing technology.

“I think technology should be able to make our jobs easier but not replace us. For example, robo advice may take away from the lower end but I don’t think it will replace the complex cases yet.”

For Mr Bentham, that is a win-win as the complex cases are the most challenging and, ultimately, the most profitable for the firm. Key will be retaining control of advice and delivering ethical solutions to complex dilemmas. ●

A healthy profession ready to face challenges and thrive is a goal for

many in the financial advisory sector. Here we talk to the recent Personal

Finance Awards winners to see what they believe wil l be crucial in

achieving this goal

It worries me beyond belief that, at 44, I am one of the youngest in the room. I am so passionate about encouraging people to look at us as a careerTHE

FUTURE IS BRIGHT

FOR FINANCIAL PLANNING

J O E L A D A M S – L I F T- F I N A N C I A LChartered Financial Planning Firm of the Year

K AT H R Y N G A N N O N – M A N N I N G C O M PA N Y Chartered Financial Planner of the Year

W A R R E N B E N T H A M – 7 5 P O I N T 3Paraplanner of the Year

B U S I N E S S F O C U S B U S I N E S S F O C U S

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MANAGING YOUR CLIENT BANK: ACTIVE OR PASSIVE?

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irst, let’s start with some questions:● Do you see using your back-office

system as a chore?● Do you think it is someone else’s

responsibility to ensure the data is correct?

● Do you see your back-office system as an asset or a liability?

If you answered “yes” to either of the first two questions and you think your back-office system is a liability, then you are exhibiting a few of the characteristics that indicate you are taking a passive approach to managing your client bank. This can seriously impact your income potential.

REL EVA NCE = POTENTIA L FOR REVENUEThe first question a client will ask themselves when they receive any communication from you is: ‘How is this relevant to me right now?’ The second question will be: ‘Do I need to take action on this right now?’

Challenge yourself to make sure that the communication you send to your clients this quarter allows your clients to answer both those questions with ‘yes’. The key to making your communication relevant is threefold:

First, keep the message simple and focused. Ideally it should be a

single topic.Second, filter your client bank

so you can identify clients that are similar ages; have similar life stages; have similar attitudes to risk; and have similar needs, goals or objectives. This allows you to keep the message simple, focused and relevant.

Finally, focus on the benefits the client may receive by taking action with you now.

SEGM ENTATION OR FILTERING?Some firms have taken the opportunity to segment their clients into groups based on levels of wealth and/or adoption of different ongoing propositions. That is a start, but not all clients in your segments will have the same needs or preferences.

By using filtering you can be very specific about the types of client you want to communicate with, which in turn makes it easier to increase the relevance of your communication. As an example, you could filter your clients that are aged over 50 into groups based on the model in the diagram below.

Then you could have a campaign to clients who are between 10 and 15 years away from taking their retirement income (some way off). You could include the following points in your letter/email:

You may need help to think through…● The age you may want to retire at;

● Deciding how much income you might need to live a comfortable life;

● Understanding the amount of savings required to create the income you want/need;

● Building confidence your money will not run out;

● Reviewing existing retirement plans and identifying any savings gaps;

● Understanding the different options open to you;

● Maximising savings and minimising tax and risk;

● Thinking about protecting some of the savings you already have.

Would this change the type of conversation you have with your clients? Using some of the tools and calculators you have at your disposal, would you find any opportunities to improve their prospects in retirement?

GET ACTIVEThat is just one small example, so think what you could achieve if you actively managed your client bank like that all the time. Ask yourself these questions now:● Do you now see your back-office

system as an asset?● Are you now going to actively

manage your client bank?● Are you going to enjoy the increases

in turnover and profit by being even more relevant to your clients? ●

Graeme Ballantyne is business consultancy manager at Prudential

Gra eme Ballant yne explores how you can use the data in your back-office system to demonstrate your relevance and unlock opportunities to develop more business

Explore each stage to see where you are in your retirement journey

W H E R E A R E Y O U N O W ?

Pre-RetirementAt-Retirement

In-Retirement

Same way off

Nearlythere

Choices and

decisions

Greater freedom

SlowdownLater life

PA R A P L A N N E R F O C U S PA R A P L A N N E R F O C U S

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TIME FOR

FACE TIME?

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istorically, face time with clients was the preserve of the adviser, with paraplanners offering support via follow-up emails and the occasional phone call. However, as the role of the paraplanner continues to transform, is there a need or even a desire among paraplanners for more direct relationships with their clients?

The role of the paraplanner seems to be an ever-changing and evolving profession, with responsibilities and expectations increasing at a rapid pace. Once confined to simple administration support and basic research, the profession has transformed during the past decade to the point where many paraplanners are just as highly qualified (if not higher) than the financial advisers they support.

This raises questions about what should be considered ‘best practice’ when conducting client meetings and how much face time paraplanners should have, or even expect, with the client. For many, there may be little interest in getting involved with the more social aspects of financial planning and it could even be seen

preferable to me, and many others, as it allows us to take a more objective and analytical view of a case. A good file, which should be encouraged, allows me to understand a person’s needs, objectives and thoughts without having to meet them. By spending less time with the actual client, we have more time to hone other skills such as technical knowledge, case management research and analysis techniques. Time is often the greatest enemy of the busy paraplanner and considering how best to use those

precious day hours is crucial.“On the flipside, for

those who aspire to become advisers, time spent learning the nuances of client meetings is invaluable for perfecting their soft skills and fact-finding processes. For in-house paraplanners, I feel this should be encouraged.”

B EST PRACTICEWithin the paraplanning

profession, there is no clear consensus on what best practice looks like, or a standard that can be followed. For many organisations, resource constraints and high work volumes ensure that the paraplanner’s time is spent behind the scenes. In many cases however, meeting the client, while not necessarily essential, can enable a paraplanner to get a better grasp of who the client is and what their objectives are.

Instead of viewing the issue in terms of the pros and cons of developing client relationships, it should be seen in terms of how the paraplanner wants to progress their career. Advice firms should encourage client interaction, to the extent that it supports the paraplanner’s professional development ambitions. If they do not, they risk losing their paraplanning talent to a competing firm. ●

Chris Spratt is membership marketing executive at the Personal Finance Society

Chris Spratt considers what

t ype of relationship paraplanners should

have with cl ients

What is your experience and position on building client

relationships? Have your say on the matter and be part of the conversation by joining

the PFS Paraplanning Professionals LinkedIn

group: www.linkedin.com/groups/8435379

H AV E Y O U R S AY

as poor use of their time. However, for those who see paraplanning as a means to progressing to giving financial advice, it could be crucial in developing the extra skills required by an advisor.

VA RIED ROL EBen Hewitt is a paraplanner at Brewin Dolphin and a member of Future Focus (formerly the Next Generation Group), which was formed to provide training and mentoring opportunities to paraplanners wishing to progress to financial advisers. He explains how the role of a paraplanner varies according to the size and approach taken by the employing firm:

“When I was working at a small firm, I found it difficult to justify spending my time in client meetings. It was something I wanted to do to progress with my career but usually it was difficult to see where I could add value. This working culture completely changed when I started working for a larger outfit, as attending client meetings and establishing relationships became the norm. It’s important for clients to have questions answered quickly, and having a prior relationship makes this much easier to do. If the paraplanner wants to progress their career in that direction, it can only be considered a good thing to have that face time.”

Not all paraplanners will have the opportunity, or even the desire to get involved with this side of the profession. Many see paraplanning as the profession they wish to progress in and see no need to meet the client. Jo Campbell, paraplanner at Para-sols, offers her view as an outsourced paraplanner:

“I am one step removed from the client. My client is the adviser. This is

I wouldn’t say there is a ‘best practice’ as it will always

depend on the client and the nature of the relationship they have with the adviser. I find it useful to be involved in the meetings as it allows me to better understand who the client is and what their objectives are. However, in reality it can be difficult for paraplanners to do this mainly due to time constraints; and that is where detailed meeting notes are vital.

A S H L E I G H M A L O N E Y I S A PA R A P L A N N E R AT L G T V E S T R A A N D M E M B E R O F F U T U R E F O C U S

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Q 2 2 0 1 7 R E G I O N A L C O N F E R E N C E P R O G R A M M E Q 2 2 0 1 7 R E G I O N A L C O N F E R E N C E P R O G R A M M E

Your quarter two regional conferences begin on 18 April in Epsom and run through to 27 June in London. This quarter’s programme is aiming to really get the grey matter working, with a broad and insightful programme that includes the following highlights:

● Budget 2017: We will delve into the detail of the Budget to draw out the new planning opportunities for you and your clients.

● Pension transfers: Understanding the key factors that determine whether your clients should stick or twist.

● Portfolios: The psychology of value and inflation proofing portfolios.

● Risk: This session will consider whether we need to radically rethink risk.

● Future proofing: Taking a long-term view on protection.

See the opposite page for a full list of quarter two dates and venues/locations. Visit thepfs.org/events now to view the full programme and to reserve your free place.

Got the app yet? If you have not already done so, why not download the new PFS events app? As well as providing all of

the functionality of the website in a tidy mobile package, additional features will help you get maximum value out of the day. Available for both Apple and Android smartphones, simply search ‘PFS events’ to locate the app and download it free.

RETHINKING RISK AND THE PSYCHOLOGY

OF VALUEPersonal Finance Professional looks head to a

packed Q2 regional conference programme

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R E G I O N D AY D AT E V E N U E

S U R R E Y T U E S D AY 1 8 A P R I L 2 0 1 7 E P S O M R A C E C O U R S E

S U S S E X W E D N E S D AY 1 9 A P R I L 2 0 1 7 A M E X B R I G H TO N

K E N T T H U R S D AY 2 0 A P R I L 2 0 1 7 M E R C U R E G R E AT D A N E S H OT E L

E A S T M I D L A N D S T U E S D AY 2 5 A P R I L 2 0 1 7 H I LTO N E A S T M I D S

B I R M I N G H A M W E D N E S D AY 2 6 A P R I L 2 0 1 7 A S TO N V I L L A F C

S TA F F S A N D S H R O P S T H U R S D AY 2 7 A P R I L 2 0 1 7 T E L F O R D I N T E R N AT I O N A L C E N T E R

H E R T S A N D M I D D L E S E X T U E S D AY 0 2 M AY 2 0 1 7 H I LTO N WAT F O R D

T H A M E S VA L L E Y W E D N E S D AY 0 3 M AY 2 0 1 7 G R E E N PA R K C O N F E R E N C E C E N T R E

L O N D O N T H U R S D AY 0 4 M AY 2 0 1 7 C I I G R E AT H A L L

Y O R K S H I R E T U E S D AY 0 9 M AY 2 0 1 7 D O N C A S T E R R A C E C O U R S E

H AY D O C K W E D N E S D AY 1 0 M AY 2 0 1 7 M E R C U R E D U N K E N H A L G H

M A N C H E S T E R T H U R S D AY 1 1 M AY 2 0 1 7 L A N C A S H I R E C O U N T Y C R I C K E T

S O U T H WA L E S T U E S D AY 1 6 M AY 2 0 1 7 T H E VA L E

B R I S T O L A N D C H E LT E N H A M W E D N E S D AY 1 7 M AY 2 0 1 7 TO RT W O RT H C O U RT

N O R T H S C O T L A N D T U E S D AY 2 3 M AY 2 0 1 7 A LT E N S H OT E L

C E N T R A L S C O T L A N D W E D N E S D AY 24 M AY 2 0 1 7 C E LT I C PA R K

T Y N E T E E S T H U R S D AY 2 5 M AY 2 0 1 7 R A M S I D E H A L L

S TA M F O R D T U E S D AY 0 6 J U N E 2 0 1 7 P E T E R B O R O U G H M A R R I OT

N O R F O L K W E D N E S D AY 0 7 J U N E 2 0 1 7 D U N S TO N H A L L

E S S E X T H U R S D AY 0 8 J U N E 2 0 1 7 H Y L A N D S H O U S E

I S L E O F M A N T U E S D AY 1 3 J U N E 2 0 1 7 S E F TO N H OT E L

N O R T H E R N I R E L A N D T H U R S D AY 1 5 J U N E 2 0 1 7 H I LTO N T E M P L E PAT R I C K

E X E T E R A N D N O R T H D E V O N T U E S D AY 2 0 J U N E 2 0 1 7 S A N D Y PA R K

P LY M O U T H & C O R N WA L L W E D N E S D AY 2 1 J U N E 2 0 1 7 L A N H Y D R O C K

H A N T S A N D D O R S E T T H U R S D AY 2 2 J U N E 2 0 1 7 A F C B O U R N E M O U T H

J E R S E Y M O N D AY 2 6 J U N E 2 0 1 7 P O M M E D ' O R

L O N D O N 2 T U E S D AY 2 7 J U N E 2 0 1 7 C I I G R E AT H A L L

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S T U D Y R O O M : T E C H N O L O G Y S T U D Y R O O M : T E C H N O L O G Y


The story around longevity is well versed. As a recent US-based Link∙age Technology Survey shows: “For those living to age 65, average life expectancy for women is now 88.8 and for men, 86.6 – one fourth of those will live past the age of 90. This is an era in which men and women aged 85+ represent the fastest-growing demographic.”

However, it has a stark warning for those who are ignoring these simple facts: “Retailers, service providers and product manufacturers don’t understand enough

about how our increasingly older adult society thinks and wants to interact with technology.”

Back home, Age UK believes that older people should be supported and encouraged to get online, but those who cannot or do not want to do so should continue to be able to access services and support in a way that suits them.

“Age-friendly design can help to increase take-up of digital technology but still, 61% of people aged 75 and over have never used the internet,” it explains.

Technology is coming in new and different ways, many of which will help older people embrace its uses. A recent Axa PPP Health Tech & You State of the Nation survey, showed 20% of those in age groups 55–64 and 65–74 believed that using health technology to regularly monitor and manage their health would have a positive impact.

The evidence indicates this trend will continue as awareness rises; for example, whereas in 2014 only 5% of respondents were concerned about tackling dementia, in 2015 the figure jumped to 14%, making it the third biggest concern after obesity and heart disease, reports Axa PPP.

Another factor set to make a difference is working into later life. The UK’s Department for Work and Pensions carried out a report into attitudes around working later in life, which showed nearly two-thirds of employees say they expect to retire in their 60s; however, 17% expect to retire in their 70s.

There is an expectation that as people stay in work for longer, they will remain more tech savvy and will adopt new uses of technology as they age.

The good news for the pensions sector is another key finding, which showed that pensions knowledge has increased: more people report a good or reasonable knowledge of pensions issues in the 2015 survey, in comparison to the same questions in 2011 (33% in 2011 and 47% in 2015).

UNDERSTA NDING CONSUMERSSo where does this leave the pensions industry in terms of understanding its consumers and their changing attitudes, particularly to the use of technology?

TIME TO MAKE THE MOST OF

TECHNOLOGY?

Another report, this time from Aviva, shows:● 45-64s are clear users of technology when it comes to

their day-to-day finances, with 84% managing their banking online;

● But 68% of 45-64s say technology is yet to have an impact on their retirement finances;

● Less than a third (28%) of 45-64s feel in complete control of their pensions, compared to 62% who are in full control of their day-to-day banking;

● Overall, a clear majority of over-45s (69%) are ‘tech adopters’ and willing to embrace new forms and devices;

● 45-64s are also far more likely to use technology to play games (40%) each week than for budgeting and planning (13%).

Aviva’s Real Retirement Report 2016 shows today’s over-45s are a tech-savvy generation, with a clear majority (69%) describing themselves as ‘tech adopters’ who are willing to embrace new devices and technology.

Yet, Aviva warns: “When it comes to retirement finances, technology has made little impact, although the industry is beginning to embrace digital innovation. Aviva’s online survey of over-45s with access to the internet found more than two in three (67%) 45-64s on the road to retirement agree technology has had a positive impact on their day-to-day financial planning, but when it comes to pensions, only 29% can say the same.”

Just 31% of 45-64s currently manage their pension online. However, this age group comprises committed users of technology across other areas of financial management, with day-to-day banking (84%), utilities bills (78%) and savings and investments (72%) the most popular aspects that are managed online. This holds true even among older age groups, with 85% of 65-74s

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There has often been a my th around whether the older generation is

prepared to use new technology, but it seems pension providers could be

missing a trick if they underestimate how much older people are ready and

wil l ing to adopt new concepts

TA B L E 1

M A N A G E M E N T A N D C O N T R O L O F P E N S I O N S A M O N G 4 5 - 6 4 -Y E A R - O L D S % of 45-64s who

have this and manage it online

% of 45-64s who feel completely in control of this

Day-to-day banking 84% 62%

Utilities bills 78% 50%

Insurance policies 71% 48%

Savings and investments 72% 46%

Tax returns 57% 25%

Pensions 31% 28%

Source: Aviva

DISCIPLINARY MATTERS

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D I S C I P L I N A RY M AT T E R S D I S C I P L I N A RY M AT T E R S

Spring 2017 | The Professional | thepfs.orgthepfs.org | The Professional | Spring 2017

The Chartered Insurance Institute (CII) wishes to make clear that, unless the case reported indicates otherwise, allegations and findings against members do not implicate those members’ employers in any way

BREAC H OF CII CODE OF ETHICSHayley Gould, Universal Worldwide Enterprises, 8 Bowlers Close, Stoke on Trent, UK (Order effective from 29 September 2016)The respondent had failed to disclose her prior insolvency when applying for membership of the CII. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions imposed were that the respondent:a) be reprimanded; b) would have to take the CII online ethics course; c) could only continue in membership subject to the approval of the membership application sub-committee;d) would be suspended from membership of the CII for a period of one year should any further allegations of breaches of the code of ethics be upheld against the respondent within the next three years.

BREAC H OF E XAMINATION AND/OR ASS ES S MEN T REG ULATIONSThe requirement not to provide assignments to another candidate was only introduced in May 2013. Candidates who have provided their assignments to another candidate having enrolled on either continuous assessment or coursework assessment between May 2013 and May 2014 have had their decisions published unascribed (without their name or employer details). Candidates who enrolled after May 2014 and breach this requirement will have their names and employer details published along with the disciplinary decision.

Nyasha Chirau, Be Wiser Insurance, Winchester House, Winchester House, Andover, UK (Order effective from 14 December 2016)Matthew Galloway, Be Wiser Insurance, Barrett House, Savoy Close, Andover, UK (Order effective from 14 December 2016)The above candidates were found to have plagiarised a P05 assignment

written by another candidate, in breach of the assessment guidelines. The CII case examiner invited the respondents to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondents agreed. The sanctions issued were that: a) the respondents be reprimanded;b) their assignment results be disallowed;c) they were excluded from CII examinations and assessments for 18 months and will have to take the CII online ethics course before taking any CII exams and assessments or applying for recognition of prior learning in future or applying to renew membership of the CII;d) no examinations, assessments or qualifications obtained by the respondents during the period of exclusion would be eligible for CII recognition of prior learning for 18 months.

The case examiner reduced the sanction that would otherwise have been applied in respect of the offence for c) and d) from two years, in light of the respondents’ early admission of the charge.

Bijay Tamang, Be Wiser Insurance, Barrett House Savoy Close, Andover, UK (Order effective from 13 December 2016)The candidate was found to have given their P05 assignment to another candidate, in breach of the assessment guidelines. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The respondent was reprimanded and required to complete the CII online ethics course.

Ashmal Kahn Dip PFS, AK Advisory, Cambrai Court, 1229 Stratford Road, Birmingham, UK (Order effective from 5 January 2017)The exam candidate had papers underneath his desk and a mobile phone on his desk during an AF3

examination, which was in breach of the CII examination admission rules. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed. The sanctions issued were that the respondent: a) be reprimanded;b) be required to take the CII online ethics course before taking any CII exams and assessments, before applying for recognition of prior learning in future, or before applying for membership of the CII;c) have his examination result withdrawn.

Natalie Cain, AEG Aegon, Serco, Ribble House, Ballam Road, Lytham, UK (Order effective from 10 January 2017)

Jennifer Lord, AEG Aegon, Serco, Ribble House, Ballam Road, Lytham, UK (Order effective from 10 January 2017)The above candidates were found to have collaborated with another P62 candidate when completing an assignment and sharing feedback on their assignment with another candidate and a third party, in breach of the assessment guidelines. The CII case examiner invited the respondents to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondents agreed. The sanctions issued were that: a) the respondents be reprimanded;b) their assignment results be disallowed;c) they were excluded from CII examinations and assessments for 24 months and will have to take the CII online ethics course before taking any CII exams and assessments or applying for recognition of prior learning in future, or applying to renew membership of the CII;d) would not be eligible for CII recognition of prior learning for examinations, assessments or

qualifications obtained by the respondents during the 24-month period of exclusion.

Unascribed cases (order effective from 19 and 20 December 2016)Two candidates were found to have given their completed assignments to another candidate, in breach of the coursework assessment guidelines. The CII case examiner invited the respondents to approve and sign a consensual order

under Rule 9.1 of the CII Disciplinary Procedure Rules 2013, to which the respondents agreed. The respondents were each reprimanded and were required to complete the CII online ethics course before taking any CII exams, assessments or applying for recognition of prior learning in future. In line with earlier precedent, the case examiner decided not to publish the respondents’ names due to the relatively recent introduction and publication of warnings not to provide assignments to other candidates.

Where the disciplinary panel or case examiner has decided to publish details of a disciplinary case ascribed (ie where an individual has been named), every care has been taken to identify members correctly. Please contact the CII if there is any doubt about the identity of a member who may have been the subject of disciplinary proceedings and in relation to whom a report has been published.

TA K E N O T E

keith - the personal finance society · pfs chief executive keith richards opened the conference by...

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