Adviser numbers fell 12% in RDR build-up

The number of retail investment advisers working in the UK plummeted almost 12 per cent in the build-up to the RDR deadline, FSA research reveals.

According to the regulator, there were 35,899 retail investment advisers in Summer 2012 – a fall of 11.5 per cent on the previous year. IFAs were the largest group, representing 58 per cent of all RIAs, followed by advisers in banks or building societies at 19 per cent.”

Some 89 per cent of the 1,436 advisers surveyed said they are definitely or likely to remain an RIA, while 6 per cent are planning to leave the industry.

The remaining 5 per cent will either retire as planned, have not yet decided what they will do or are unsure of their prospects.

The FSA says it will publish a full report detailing the findings of the survey shortly.

This follows separate research published by the FSA in November which suggested around 12 per cent of IFAs are likely to switch to offering restricted advice post-RDR.

This means that there are a lot more people looking for Financial Advice with a lot less of advisers there to give them advice, it is my opinion that the FSA have alienated a lot of consumers from getting the basic advice they need as the majority of Financial Advisers will want a fee for the less well off clients.

I am happy to do a full financial review free of charge on the first consultation, so please feel free to contact me.

The FSA needs to find a better way to oversee advisers

So, here we are safely in the RDR era. But how does the landscape look? Is the terrain as widely different as predicted by a few media naysayers?

I think not as I believe the financial advisory world is now a better place to be in and its reputation with the public will continue to improve. covering professional standards, charging, description of services and independence and restricted offerings. This will be done in three cycles beginning later this month. It will publish its findings after each cycle.

If advisory firms are not on track after the third cycle, action will be taken thereby filling the regulators purse and forcing RDR improvements to be undertaken by the firm.

All findings will be used to form a post-implementation review of the RDR. To me, this exercise sounds like a great deal of time intensive work to be undertaken by the Financial Services Authority.

Where will the time come from as it morphs itself into the Financial Conduct Authority, costing millions of pounds to change the name of the regulator across literature, business cards, advertisements and other expensively produced items?

My last IFA inspection visit took three bright young people employed by the then regulator more than three days to inspect my IFA business. We were a small firm with two RIs. Thankfully we were found to be satisfactory. This is one reason why I now help firms with regulatory issues.

It takes millions of pounds to thoroughly inspect advisory firms. Would it not be better for clients to feed back on their experience with financial advisers on a website similar to Trip Advisor from which the FSA can then follow up? For after all, some of the most experienced financial advisers, especially IFAs receive only circa 1 per cent of all FOS complaints. The FSA may be wasting its time inspecting many quality firms or will need to ‘nick pick’ to justify the huge cost of visiting firms.

The independent versus restricted debate continues but at last the banks have disclosed their charging structures.

HSBC is charging £950 upfront for those with assets of less than £75,000 which will cover the majority of the investing public. As HSBC is offering a restricted product range people may better be served seeing an IFA who will offer a more personal service, whole of market advice and will charge a similar upfront fee with the first meeting free. It is so much more conducive to receive financial advice at your work place, home, or in a social environment than making an appointment at a bank branch which can result in waiting in a banking hall full of people.

The bank advice could then be geared towards product sales as HSBC pay a bonus to high performing financial advisers.

Description of service is fairly straightforward with most of the information already on websites which will be checked out by clients before making an appointment. This is where clever market positioning is needed by those who offer the services to ensure the benefits of tax, inheritance and trust planning is understood.

The nirvana of being financially secure and debt free in both in sickness and health is, and always will be, about financial planning – not product sales. I wish the RDR was more about focused on highlighting the benefits of financial planning.

Money Advice Service healthcheck set for overhaul

The Money Advice Service has admitted its £2m online healthcheck tool “needs improvement” and has revealed plans for an overhaul.

In March, Money Marketing revealed MAS research showed of 1,000 healthcheck users, 300 did not remember doing it and an additional 371 failed to do anything differently.

MAS is currently the subject of a Treasury sub-committee inquiry. In June, founder Martin Lewis branded its tools “crap” and “embarrassing”.

In a letter to Treasury sub-committee chair and Labour MP George Mudie, published today, MAS chairman Gerard Lemos highlights Money Marketing’s coverage and adds: “It is clear that overall the results of research done so far have pointed to the need for us to improve the health check.

“Building on this consumer insight, we will build a ‘mark II’ healthcheck which we expect to be far more impactful.”

A MAS spokesman refuses to disclose how much the redesign will cost, but insists it has already been factored into the 2012/13 budget.

Clayden Associates director Daniel Clayden says: “It is concerning as there was a large amount of money spent so the healthcheck tool should have been thoroughly tested. Hopefully it will learn from its mistakes.”

In the letter, Lemos reminded Mudie that the MAS began withdrawing previous remuneration arrangements for new staff on January 1. Existing staff began transferring to the new arrangements on June 1 but will be compensated for any lost income unless they leave or move position within the organisation. All directors are in the process of moving.

The new arrangements will be based around MAS’ reward strategy, developed in 2011, focusing on delivery of its objectives, the ability to recuit high calibre staff and affordability and value for money. It includes the withdrawal of flexible benefits package and non-contributory pension scheme.

Lemos says management recognised that staff transferred from the FSA were on unsuitable and unsustainable wages for a smaller, “more commercially-orientated” organisation.

This week MAS launched a six-week marketing campaign across television, in print and online with the tagline, “What does Ma think?”.

Markets regain majority of losses despite Italy concerns

European markets have recovered most of their early losses despite concerns that Italy may be the latest country to fall victim to the eurozone crisis.

At close, the FTSE 100 stood at 5510.82, a fall of 0.3 per cent from its opening price, while the French Cac 40 and the German Dax were both down 0.6 per cent.

Markets across Europe fell by around 2 per cent in early trades as concerns were raised over political uncertianty in Italy. The yield on Italian 10-year bonds rose from 6.37 per cent to a high of 6.64 per cent, before falling back slightly. Prime Minister Silvio Berlusconi is set to face a vote on public finance tomorrow.

Meanwhile, Greek prime minister George Papandreou has stepped down to make way for a unity government of all political parties, despite winning a vote of confidence late last week. A new prime minister will be named to head the coalition government, with fresh elections forecast for early next year.


Building societies get mortgage indemnity cover

Genworth Financial is to provide mortgage indemnity insurance for the building society collective Mutual One.

The partnership between the two organisations will mean that building society members of Mutual One can use the mortgage indemnity insurance provided by Genworth Financial to maintain a presence in the higher loan to value and first-time buyer market.

Building society members of Mutual One include Hanley Economic Building Society and Skipton Building Society.

Mutual One chief operating officer Andrew Gold says: “We believe the MII collective relationship will help societies continue to meet their core purpose of providing a wide choice of residential mortgages including those for borrowers who need higher LTV mortgages.”

Genworth Financial mortgage insurance senior vice president of UK commercial business Tammy Richardson says: “It’s a long held principle of Genworth that mortgage insurance enables lenders to widen access to home ownership for consumers through the bad times as well as the good.

“We advocate prudent lending as a means to returning to stability in the housing market, and believe this new facility with Mutual One will help both the building societies involved, and their customers.”

Building Societies Association chairman and Hanley Economic chief executive David Webster says: “The Hanley wants to continue to lend to the first-time buyers within our local community at 90 per cent LTV. The new Genworth and Mutual One mortgage insurance collective will provide The Hanley with a cost effective approach to mortgage insurance. We look forward to a long term successful relationship with Genworth and Mutual One.”

Genworth Financial were among several industry figures called together by housing minister Grant Shapps last week to discuss how to help first-time buyers access the housing market.

Other attendees included Council of Mortgage Lenders director general Michael Coogan, BSA head of mortgage policy Paul Broadhead, and FSA manager of credit risk Duncan Mackinnon.

Mervyn King hints at May interest rate rise

Bank of England governor Mervyn King has hinted interest rates may rise in May, with further increases possible by the end of the year.
He says this prediction is based on bank rate increases “in line with market expectations”. Many experts have suggested a 0.5 per cent rise in rates is likely in May with further rises throughout the year.

King says three factors account for the current high level of inflation, including the January rise in VAT, the continuing consequences of the fall in sterling in late 2007 and 2008 and recent increases in commodity prices, particularly energy prices.

He says: “Although one cannot be sure, prices excluding the effects of these factors would probably have increased at a rate well below the 2 per cent inflation target.

“Inflation is likely to continue to pick up to somewhere between 4 per cent and 5 per cent over the next few months. That primarily reflects further pass through from recent increases in world commodity and energy prices.

“The MPC’s-central judgment, under the assumption that bank rate increases in line with market expectations, remains that, as the temporary effects of the factors listed above wane, inflation will fall back so that it is about as likely to be above the target as below it two to three years ahead.”
Last week, the Bank of England’s Monetary Policy Committee held base rate at 0.5 per cent for the twenty-third month in a row and held its quantitative easing programme at £200bn.

Interest Rates

When do you think interest rates will rise?

The bank rate was left unchanged again at 0.50% at the January meeting, the 22nd month in a row.
So what will happen in 2011, 2012 and beyond?

The general view of economists and markets is that the first rise will come late in 2011 but the forecast has been shifting and a token rate rise well before that is a possibility.

If you are worried about what the future holds for your Mortgage or any other need, give me a cal or send me an email.

Base Rate unlikely to rise

The Bank of England is likely to hold Base Rate at its current historic low of 0.5% for the foreseeable future.

UK Business Secretary Vince Cable admitted in a speech to the Lib Dems yesterday that there “would be a problem” if the Bank were to increase the rate.

He went on to point out that most of the decision makers at the Bank did not support a Rate rise.

Andrew Sentance, one of the nine members of the Monetary Policy Committee (MPC), which takes a monthly vote on whether and how to move the rate, is in favour of an increase to keep a lid on consumer prices.

“There’s one member of the MPC who says inflation’s coming back,” Cable said.

“He’s just one. It’s very clear that the inflation we have in the system is largely imported. You don’t deal with imported inflation by shoving up interest rates.”

Speaking at an event hosted by Your Mortgage sister publication Mortgage Solutions last week, Nationwide’s head economist forecast that the Base Rate would not increase until 2012.

Mark Saddleton, head of economic and market analysis at Nationwide, said that, while inflation is likely to be back at 2% in two years time, the Bank of England is more concerned with growth than inflation, meaning it is “entirely conceivable” that the Base Rate will not increase in 2011.

He said that when the Base Rate does rise, it will do so very slowly.

However, Saddleton sounded a note of caution for the future, saying that “…when interest rates rise, a lot of households will have significant difficulties in repaying their mortgages.”

First Time Buyer

Recent turmoil in the housing market has made it more difficult to get on the property ladder, with lenders looking for bigger deposits and spotless credit histories. But you might still be able to get a first time buyer mortgage deal, depending on your circumstances.

Save time shopping around and check out the latest first time buyer mortgage deals using our no obligation mortgage service: just give me a call to arrange a visit.