1. Learning & Development Regulatory Update Round 2 - 2018

2. Learning Objectives
Understanding the impact of rules made to pension transfer business
Gain an understanding on how firms should participate in the sales process when introducing pension transfers
Awareness of the latest EU Directives that will shape UK regulation

3. The FCA Business Plan Financial Advice Market Review Pension Transfers
Senior Managers Regime
Platforms

4. Financial Advice Market Review

5. Financial Advice Market Review (FAMR)
The Review
Financial Advice Market Review (FAMR)
Will it improve access to advice?
Will it reduce costs?
Reviewing of FAMR

6. The Review The Paper reminded us to some of the FAMR recommendations:
Setting up FCA’s Advice Unit
Amending the definition of advice
Reducing time spent on suitability reports
Reminding firms of their flexibility in adviser charging

7. FAMR Research Size of the Market
9% of UK adults received regulated advice in last 12 months
82% of which was from an adviser from an advice firm
Over 40% received advice regularly
33% received annual reviews
Key findings: Quality of Advice
“Those who have had regulated financial advice in the last 12 months are generally satisfied with the quality of the service received and the price paid, and there is little shopping around ”

8. FAMR Research 3% of adults take advice from automated services
“this figure may be overestimated given some said earlier they had not received regulated financial advice or paid for the advice they received”
3% of adults used Pension Wise in last 12 months

9. FAMR Research
Reducing time spent on Suitability Reports This is one of, if not, the most time intensive exercises in the advice process The answer…….

10. PENSION TRANSFERS

11. The Proposals Pension Transfers More field based reviews PS 18/6
CP 18/7

12. Questions under consultation
Do we need to change the PTS qualification requirements?
How should a PTS work with another adviser/firm?
Should we introduce guidance for Triage services?
What about a report to clients when they are advised NOT to transfer?

13. Questions under consultation
Should we change the definition of a transfer?
What about guidance on assessing the attitude to transfer risk?
Does Contingent Charging result in bad advice and should we do something about it?
How should we treat self-investors?

14. The Outcome
Suitability reports are required for advice not to transfer
Transfer risk questions and assessment is now required as part of the suitability rules
Self-Investors – adviser needs to account for the destination of the funds
Definition of a transfer still under review

15. Pension Transfer Specialists
A PTS will have to hold investment exams and be level 4 qualified?
Must be obtained by 1st October 2020
CPD?

16. Working with other firms/advisers
Referrals for transfer advice only
PTS must take into account destination of funds
Both parties must work together and gather attitude to transfer and investment risk
Each party should communicate their advice so it is clear to the client
Advice charge? – Use correct agreement

17. Triage Services
This is an initial conversation with a potential client – a free consultation
Any indication to stay or leave would be advice
“Triage must be educational and present a balanced view of advantages/disadvantages”
Firms can refer to FCA’s starting assumption ‘unlikely to be suitable’ but must not provide a TVC

18. No transfer No fee Contingent Charging
Changing rules may have wider implications for firms and customers
Contingent charging models and unsuitability is difficult to prove
The link between triage and contingency models is recognised and more work will be undertaken
No transfer
No fee

19. Triage & Contingent Charging

20. The Senior Managers & Certification Regime

21. Senior Managers & Certification Regime
The Regime
Senior Managers & Certification Regime
New guidance confirms responsibilities and other duties
We expect more guidance to follow
We will provide templates

22. Platforms

23. Platform Market Review
Switching platforms can be difficult
Shopping around can be difficult
Model portfolios are difficult to compare
Customers are holding too much cash
Orphan clients can be charged more

24. Questions to the advice market
Q.- Comparing platform charges – Do existing disclosure requirements go far enough?
Firms have to disclose advice charges
Platform charges have to be disclosed
For MiFID & IDD products there has to be aggregated charges
OUR RESPONSE:
Is this a call to simplify disclosure requirements but please no more!

25. Questions to the advice market
Q.- What additional costs do firms incur when reviewing platforms and then switching?
Reviewing is part of general due diligence
For the individual client this would likely be incorporated within the (annual) review
The switch could be considered a transactional cost. What is the transactional cost?

26. Questions to the advice market
Switching Platforms!
What if you use 1 platform and identify a client would be better off switching? All others!
What is the regulatory process for platform switching?
Is it a re-direction or a switch?
What if there is a platform switching review?
What if it moves to a different share class?
What if it does not have an existing fund?
What if it is a product that needs cancelling i.e. a bond?
Would it be classed as a full pension switch?
Time out of the market?
OUR RESPONSE:
A ‘user friendly’ guide

27. Questions to the advice market
Q. Should adviser payments be turned off for orphan clients?
Yes. No one should pay for something they don’t get or need
An orphan client is where there is no activity after 12 months
How do you determine inactivity?
Is it where there has been no trading activity on the account?
Can firms provide a service without changing an investment?
Would it cause unnecessary trading?
OUR RESPONSE:
Platforms should liaise with firms where ‘material’ charges are made and no activity is conducted

28. Questions Over!
That concluded the questions directed towards the advisory sector
They did raise other concerns that they said would need to be considered
We considered these needed further comment before their escalation

29. Non-monetary benefits
Do these tools/services create biases?
Exam preparation
Model portfolio management
Bulk rebalancing / switching
Risk profiling / asset allocation
Retirement modelling
Cash flow forecasting
Should they reduce advice charges?

30. See you in the New Year

31. Learning Outcomes
Understanding the impact of rules made to pension transfer business
Gain an understanding on how firms should participate in the sales process when introducing pension transfers
Awareness of the latest EU Directives that will shape UK regulation