Much has been discussed about the retail distribution review but it is extremely positive for current and future clients who expect to be advised by trained and qualified individuals who are committed to maintaining such standards in the future.
The CII and IFP titles of chartered and certified financial planners, while clearly a cause for some confusion, are demanding and relevant qualifications which set apart truly professional advisers from those with less inclination to be so. Corporate chartered status is a huge step in the direction of recognising that financial advice is a profession which can be on a par with lawyers and accountants. All these initiatives are to be welcomed and allow consumers to be able to determine from where quality advice can be obtained.
More good news for consumers comes in the form of pension reform and the third way of income in retirement products currently being made available to the UK retiring population. Yes, it is too early to judge whether these products will become mainstream and, yes, it is also too early to say for certain whether the guarantees provided by these products are worth the price being sought by the providers. Nevertheless, there is now an option between annuities and income drawdown and this development must be the start of further work in this vital area for advisers and clients.
More development is also evident with the plethora of products under the label of factory-gate pricing. Provider margins are clearly coming under some pressure. The additional cost of certain wraps is unwelcome but if it can be negated by the product cost savings, there must certainly be a win available. The question must still be, from a TCF perspective, to justify the additional cost of the wrap when an unwrapped, factory gate priced version is cheaper. Again, there must be further developments in this market which will produce very interesting opportunities.
The tax treatment of alternatively secured pensions is hardly good news in isolation but debate continues and pressure mounts for the inequalities of the penal taxation system to be reconsidered. Currently, all we can say positively is that 18 per cent of something is better than 100 per cent of nothing but there are also great advice opportunities available to form financial plans now to mitigate such taxes in the future.
With turmoil comes opportunity and the debacle at Northern Rock has generated a stream of enquiries from clients seeking advice on their savings accounts. While it is hardly demanding, it is tedious for clients to keep track on a big number of savings accounts where there is a need to diversify monies and this presents good opportunities for fee-based advice.
Some pundits consider that property fund returns will continue to be poor. Again, this presents opportunities for those prepared to look further. Clients with direct commercial and residential property interests might now reconsider whether the hassle of property ownership, maintenance, repair and rent collection is really worthwhile when investments are available at much greater yields and, it could be argued, much greater growth potential for the future. Realising gains with 10 per cent capital gains tax is something which serious property investors are already considering. Holistic advisers should be raising these issues with clients.
The “buy now while stocks last” season of the enduring powers of attorney is now over but those lawyers who bought into this early have certainly generated considerable additional fee income in 2007. There was no more need for an EPA than there had ever been but the deadline focussed the minds. We cannot impose deadlines where these do not apply but we can ensure this focus is maintained in dialogue with clients and subsequent financial education.
Peter Heckingbottom is investment director and deputy managing director of Pearson Jones