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IFAs won’t be hit by client money rules

IFAs will not be deemed to be holding client money when they rebate commission under a menu fee arrangement, the FSA has confirmed.

Aifa director general David Severn raised concerns that the menu system could lead to IFAs effectively holding client money when they get commission from providers under fee arr-angements. This would place them under onerous client asset rules designed to safeguard consumers’ money.

But the FSA says IFAs will be able to continue to operate after June 1 without invoking client money rules, even when they get trail commission.

Director of retail policy Dan Waters admits it would be “disproportionately onerous” to apply the full rigour of the rules to these situations.

The FSA says it will do all it can to ensure that most IFA firms are not brought within the European Union Mifid rules – hitting the UK in 2007 – which will ban firms from being indebted to their clients.

Waters says: “Firms operat- ing fee agreements where commission is rebated to the client, either directly or by holding excess amounts against future fees, will continue to be able to construct their fee agreements in such a way that client money rules are not engaged.”

Severn says: “The FSA app-ears to be saying that the client money rules do apply but, given the preparation for depolarisation that IFAs have to do, it won’t apply to them.”

Skerritt Consultants head of investments Andrew Merricks says: “I do not think that IFAs really have much of an excuse if they get this wrong.”


Daniel Godfrey

Daniel Godfrey has taken some hard knocks over the last seven years in what is arguably one of the hottest seats in UK financial services as director general of the Association of Investment Trust Companies.

Test drive

Last week, I looked at the substantial non-trading activities test in relation to capital gains tax business assets taper relief. For those who are or may be considering selling their shares in a private trading com- pany, this relief represents a massive improvement in the net return they would otherwise receive.

Transact cuts high-end charges in wrap war

Transact has slashed charges on funds for wealthier clients in a wrap price war sparked by Abbey undercutting its rates for high-volume business. Baxter Fensham director John Baxter says Transact was losing clients in the £500,000 to £1m market to Abbey because the bank-owned wrap’s charges were sometimes thousands of pounds cheaper for wealthier clients. […]

Strong dollar can be a powerful driver of UK dividend growth in 2015

By Robin Geffen, fund manager and CEO 

This year threatens to be a challenging one for UK dividend hunters. Last year saw an all-time record amount paid out in UK dividends — some £97.4bn, according to research from Capita Dividend Monitor. Yet as Capita also pointed out, out the biggest single factor driving the growth in the fourth quarter of last year was easy to identify: the rising US dollar. 

In our view, this trend is much more than simply a one-quarter phenomenon. It is actually the most profound issue to get right as a UK equity income investor in 2015. We believe that the US dollar will continue to strengthen significantly from its current level. This is due more to the US economy’s demonstrable de-coupling from the rest of the world than to a view on the UK. The US has a strong chance of tightening monetary conditions this year without jeopardising growth or de-stabilising its housing market. The same can unfortunately not be said about the UK.


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