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.

http://www.moneymarketing.co.uk/adviser-news/kim-north-the-fsa-needs-to-find-a-better-way-to-oversee-advisers/1064226.article

Labour claims state pension reform has been “sunk”

The Government says it remains committed to its state pension reforms despite industry concern that public sector pension settlements threaten the proposals and Labour claims the Treasury has “sunk” the plans.

In April last year, pensions minister Steve Webb unveiled a green paper outlining proposals to bring an end to state pension means-testing and offering a higher state pension of around £140 at today’s prices by either introducing a single-tier state pension or accelerating plans to flat-rate the state second pension
Labour Shadow pensions minister Gregg McClymont (pictured) says Webb’s plans to reform the basic state pension may have been vetoed by the Chancellor due to the costs. He says: “State pension reform was the Government’s flagship pension policy. It appears it may have been sunk by the Treasury.”

Writing in Money Marketing this week, Hargreaves Lansdown head of pensions research Tom McPhail says public sector pension disputes will be making the Government nervous about state pension reform.

He says: “It is possible the Treasury is getting cold feet about the knock-on effect reform of the state pension would have on negotiations with the public sector unions over their final-salary schemes.

“The end of contracting out would mean an increase in NI rates for the five million public sector workers who are currently contracted out through their final-salary schemes.

“It is a safe assumption they would react very badly to being asked to pay 1.4 per cent in NI on top of the 3 per cent increase in member contributions which the current Treasury-led reforms of public sector pensions have demanded.”

Saga director general Ros Altmann says: “Any delay is likely to be linked to the public sector pensions issue but Webb and Work and Pensions Secretary Iain Duncan Smith are still committed to getting this reform through.”

Institute of Directors senior pensions policy adviser Malcolm Small says: “The issue of contracting out is a difficult one for both the Treasury and the DWP, particularly in relation to public sector workers, but there will be many more winners out of this than there will be losers.”

A Department for Work and Pensions spokeswoman says: “We will be bringing forward further proposals on a simpler and fairer state pension in due course.”

Source “http://www.moneymarketing.co.uk/pensions/labour-claims-state-pension-reform-has-been-sunk/1044201.article

Auto Enrolement or Nest (Do you know what it is?)

More than 100 employers around the UK have agreed to enrol some of their staff in the new national top-up pension scheme known as Nest – the National Employment Savings Trust.

Employers will not be formally obliged to begin the phased enrolment of their staff in Nest until October 2012.

If they already run a decent pension scheme, then all staff can be automatically enrolled in that instead.

But in a “soft launch” that began in July this year, a variety of small, medium-sized and large employers have volunteered to start the Nest process.

This will gradually ramp up activity, so that the Nest system will be absolutely ready come October next year.

So, how is it going?

“It’s going pretty well,” said Tim Jones, the chief executive of Nest.

“What is happening here is probably the single biggest implementation of behavioural economics, certainly in the financial sector, that’s been done yet.”

The basic facts

Automatic enrolment, either into Nest or an existing company scheme, begins in October 2012 and will apply to workers who:

are at least 22 years old but below their state pension age
earn more than £7,475 a year
Minimum contributions will be paid on their earnings between £5,035 and £33,540.

Employers will start paying a minimum of 1% of qualifying earnings, rising to a minimum of 3% by 2017.

Employees will start paying a minimum of 1% of their qualifying earnings, rising to a minimum of 5% by 2017.

The process of employers joining Nest and automatically enrolling their staff to it – or to their own pension scheme – will start with big and medium-sized employers between 1 October 2012 and July 2014.

Small and micro employers will have to join in the process between August 2014 and February 2016.

sourc “http://www.bbc.co.uk/news/business-15270701

 

 

Politicians move to battle debt crisis

Markets in the Far East fell last night and the FTSE 100 fell this morning as politicians continue to battle the debt crisis.

In the Far East markets reacted badly to news of America’s downgrade with Japan’s Nikkei 225 falling 2.18 per cent to 9098 by close while in China the Shanghei Composite index fell 3.77 per cent to  2527.

The FTSE 100 fluctuated this morning and by 10am had fallen 0.76 per cent to 5207. This follows a fall of nearly 10 per cent last week.

Over the weekend, Standard & Poor’s announced it had downgraded America’s credit rating for the first time, from AAA to AA+, due to concerns about the way American politicians are responding to the escalating debt crisis. In Europe, the European Central Bank is to purchase Euro member state bonds in an attempt to allay debt concerns.

Latest news on the debt crisis:

* The Telegraph reports that Bank of England governor Mervyn King is expected to reduce the UK’s target range for growth.
* In an interview with The Sunday Times, Business Secretary Vince Cable warned that Britain could face a double-dip recession but rejected comparisons with the 2008 credit crisis.
* The European Central Bank has announced it is purchase Euro member state bonds in an effort to halt financial market contagion as markets opened this morning. A statement from the ECB, released yesterday, welcomed deficit cutting measures taken by Italy and Spain and welcomed a statement from France and Germany which pledged that the European Financial Stability Fund would take over paying for the purchases when it is fully up and running. The move is seen as a watershed moment because until now the ECB has maintained that responsibility for dealing with the Euro crisis rests with National Governments.
* Italy brought forward a pledge to balance the country’s budget from 2013 to 2014 to enable the move. Interest on Italy’s 10 year bonds reached 6.08 per cent on Friday, after hitting 6.4 per cent, the highest level since 1997. Spain’s bonds were offering 6.05 per cent. Some economists argue that anything higher than 7 per cent makes borrowing to fund Government spending unsustainable.
* On Sunday Angela Merkel appeared to support the move in a statement with Nicolas Sarkozy saying it was up to the ECB to decide when there was a material risk to financial stability. However, its been reported Merkel complained to Chancellor George Osborne in a phone call about European Commission President Jose Manuel Borroso’s claim more action was needed beyond what was agreed by European leaders in July.
* The IMF has welcomed the statements from the European Central Bank, Germany, France and the G7.
* Amid reports accusing European leaders of being absent in a crisis, George Osborne also called G7 leaders on Saturday from his holiday in California, stressing the interconnected nature of the European and American debt crises. Speaking to European Monetary Commissioner Ollie Rehn he suggested launching Eurobonds in exchange for more control over member states’ domestic economies.
* Standard and Poor’s is warning this morning that Asian sovereign ratings could face downgrades if global financial markets deteriorate. The ratings agency says its downgrade of US debt to AA+ on Friday would not weigh on Asian Governments ratings in the near term but added Asia-Pacific economies would have to support their domestic economies.
* The Australian market dropped 2 per cent as it opened and briefly rallied during the day but at close the S&P/ASX200 index was down 2.9 per cent.

“Money Marketing 08/08/2011

US debt-limit bill heads to Senate

The US Senate is to vote on a bill to raise the nation’s debt limit, one day after the House of Representatives backed it and hours before a deadline.

Monday’s vote in the House appears to have averted the prospect of the first full-scale US federal debt default.

Members of the 100-seat Senate will vote at midday (16:00 GMT) on Tuesday. If approved it will be signed into law by President Barac

The bill has the backing of Republican and Democratic leaders in the Senate and is thought likely to win the support of the 60 senators it needs to pass.

In the House on Monday evening the bill passed by a clear margin of 269 votes to 161.

Despite ongoing reservations about how the bill would fare with conservative members of the House, the bill won the backing of 175 Republicans, with 66 voting against.

Democrats were more evenly split – 95 for and 95 against.

The vote was notable for the reappearance in the House of Congresswoman Gabrielle Giffords for the first time since she was shot in the head in Tuscon, Arizona in January.

Ms Giffords – who has undergone a number of operations – caught lawmakers by surprise when she appeared on the floor of the House on Monday evening.

There was a standing ovation and embraces for the Democratic representative, who voted in favour of raising the debt ceiling.

k Obama.

 

The deal ties a $2.4tn (£1.5tn) debt increase to spending cuts.

The Senate vote will take place barely 12 hours before Washington is due – according to the US treasury department – to cease to be able to meet all its bills.

What about your Pension?

A report by Aviva and Deloitte has today cast a very dark shadow on the UK pension fund industry with the revelation of a £318 billion a year shortfall in pension funding in the UK. Each and every adult retiring over the next 50 years will need to put away over £10,000 a year to close the pension fund gap which is defined as the difference between income required for a comfortable living and that currently available from pension funding at the moment.
Is it time for you do something about this NOW!