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.

Worst-hit funds fell by a quarter amid volatility

Standard Life’s £40m UK equity recovery fund has been the worst-performing fund across the IMA sectors over the last three months, according to data from Morningstar.

Recent volatility in the markets has affected the short-term performance of a number of funds. Financials have been badly affected through the equity sell-off of the past few weeks, as investors become increasingly risk-averse in response to global events.

.Standard Life’s UK equity recovery fund fell by 25.5 per cent between May 24 and August 24. JP Morgan’s £117.7m global financials fund is the second-worst performer, falling by 24.3 per cent over the same period.

Third on the list is the £19.6m CF Richmond core fund, which fell by 23.92 per cent, followed by the £52.5m CF junior oils trust which took a 23.7 per cent hit.

Sector Investment Managers chief executive Angelos Damaskos, who manages the junior oils trust, says: “Medium to smaller-sized companies have suffered the worst during the sell-off because of the risk aversion of investors. The mandate of the fund constrains us to these types of stocks.”

Damaskos says he has sold down the fund’s 30 per cent holding in cash and bonds to 14 per cent over the last few months in favour of cheap equities. He expects the stocks will re-rate when markets stabilise.

Standard Life’s £436.5m UK equity unconstrained fund is the fifth-worst performer, down by 23.4 per cent. Manager Ed Legget says global growth expectation has fallen as a result of sovereign risk in Europe and policy issues in the US.

He says: “I have been overweight industrials, which has hurt particularly in the last few weeks. Industrials have de-rated by 25 to 30 per cent over a four-week time period.”

In terms of industrials, he remains committed to the sector. He says: “Corporate capex and emerging markets is a better place to be than developed market consumer over the next two to three years.”

Legget has added 2 per cent to UK banks to make up a 5.5 per cent position over the last couple of months.

He says: “It is riskier not to own banking stocks. They have got the potential to go up a long way if people get a little bit more confident about life.”

Legget says the Standard Life UK equity recovery fund’s focus on recovery stocks and its high exposure to financials has hurt performance over the last four to six weeks. He says: “Recovery stocks are not as popular in times of uncertainty, where people are less optimistic about the prospect of recovery.”

The sixth-worst performer is the Cavendish European fund, followed by the Digital Stars Europe ex UK fund, Jupiter China, JPM Europe smaller companies and the Ignis European growth fund in 10th spot.

A spokeswoman for Cavendish Asset Management says: “Cavendish takes a stock picking approach looking for value in our investments and, as such, the European fund has had some exposure to underperforming markets. We have recently re-aligned our position to reflect these volatile times selling a number of stocks and re-defining our exposure to the emerging economies of Europe.  We continue to believe that there is value in Europe and are confident that the portfolio contains  attractively priced stocks which offer the prospect of outperformance moving forward.”

Premier Wealth Management managing director Adrian Shandley says: “Global financials have underperformed because of the banks but the managers of the other funds must have been taking speculative smaller companies positions.”

Source “ “

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.

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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.