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Elections, steelworkers and SJP: the biggest stories of 2017

We revisit some of the more memorable stories of the past 12 months, from SJP’s fees to Theresa May’s election mess and steelworkers’ pension strife

January

This year kicked off with the first of many stories concerning troubled discretionary fund manager (DFM) Beaufort Securities. It had its permissions restricted by the Financial Conduct Authority (FCA).

The restriction meant that for Beaufort to be able to class any of its discretionary service as regulated, it had to ensure it gained the instructions of its clients or advisers first.

This followed the regulator changing the firm’s FCA register page towards the end of 2016, to indicate it could not carry out any regulated DFM service. This was the first of three sets of regulatory restrictions imposed on Beaufort this year (more on this later).

Also prominent in January, apart from the New Model Adviser® conference, of course, was the death of national advice firm Towry. The brand was finally absorbed, following its £600 million acquisition by Tilney BestInvest in 2016. Tilney, BestInvest and Towry are now simply Tilney.

January

This year kicked off with the first of many stories concerning troubled discretionary fund manager (DFM) Beaufort Securities. It had its permissions restricted by the Financial Conduct Authority (FCA).

The restriction meant that for Beaufort to be able to class any of its discretionary service as regulated, it had to ensure it gained the instructions of its clients or advisers first.

This followed the regulator changing the firm’s FCA register page towards the end of 2016, to indicate it could not carry out any regulated DFM service. This was the first of three sets of regulatory restrictions imposed on Beaufort this year (more on this later).

Also prominent in January, apart from the New Model Adviser® conference, of course, was the death of national advice firm Towry. The brand was finally absorbed, following its £600 million acquisition by Tilney BestInvest in 2016. Tilney, BestInvest and Towry are now simply Tilney.

February

It took less than two months for St James’s Place (SJP) to hit the headlines this year.

The Sunday Times obtained a document that referred to the fees paid by clients as ‘initial commission’. The document, How Partners Get Paid, demonstrated how the group runs a ‘Nectar points’ system, rewarding advisers with holidays and jewellery for bringing in high levels of client investment.

SJP chief executive David Bellamy (pictured) defended the document: ‘If I go into John Lewis and look around, they don’t charge me. If I buy something, they make some money. That’s what I call a contingent fee. It’s the way the world works.’

But more problems emerged for SJP when New Model Adviser® revealed one partner firm wrote to clients defending the Nectar points system.

Elsewhere in the world, international advice business DeVere Group was issued with a section 166 (skilled persons) review by the FCA. It also agreed to stop providing defined benefit (DB) pension transfer value reports. DeVere said it was confident there had been no detriment to clients, and was cooperating fully with the regulator’s investigation.

March

March began with an earthquake of a deal, as fund behemoths Standard Life and Aberdeen Asset Management announced an £11 billion merger.

The two firms were forced to rush out a statement on Saturday 4 March to confirm talks were under way, and over the year more details emerged about the deal.

The combined group, renamed Standard Life Aberdeen (we were hoping for Staberdeen), overtook Schroders as the UK’s largest asset manager.

Later that month came the Spring Budget. Spreadsheet Phil used his inaugural Budget as chancellor to cut the tax-free dividend allowance and slap a 25% tax on Qrops transfers.

Advisers in large part, needless to say, were unimpressed with the dividend tax. Some labelled the Budget an attack on small business. Hammond presumably thought, what with that sizeable majority and a flailing opposition, a few slightly unpopular fiscal policies would be fine and dandy….

The other, more sombre, March news was the sudden death of Succession founder and chief executive Simon Chamberlain (pictured), at the age of just 51.

April

By April, the DB transfer news juggernaut was gathering pace. New Model Adviser® revealed that over the previous year, 16 firms had agreed with the FCA to stop activities relating to pension transfers.

This would prove to be the tip of a rather hefty iceberg, as a flurry of complaints to the Financial Ombudsman Service and stories about IFAs and Sipp firms receiving visits from the regulator continued throughout the year. The FCA’s review of DB transfer advice produced some worrying results, with less than half of transfers transacted being deemed suitable.

In April the regulator also announced plans for its platform market study. It wanted to address competition issues and establish whether platforms were offering ‘value for money’ to consumers.

The biggest advice news from outside Canary Wharf came in the form of AIM-listed national IFA Frenkel Topping, which put itself up for sale.

In the political world, prime minister Theresa May (pictured) decided to build a stronger and more stable government by holding a general election, which would undoubtedly earn her a bigger majority…

May

The month began with a high-profile technology-related break-up, as Old Mutual Wealth dumped tech provider IFDS in favour of its rival FNZ.

The IFDS Bluedoor project was set to cost Old Mutual Wealth £450 million, much higher than originally planned.

Chief executive Paul Feeney (pictured) said the decision to ditch IFDS for the FNZ project was not taken lightly, given the costs already incurred. The new deal is expected to cost between £120 million and £160 million.

Some of the FCA’s behind-the-scenes activity in its landmark Assessing Suitability review was also brought to light. New Model Adviser® got hold of feedback received by a firm whose fee disclosure was deemed ‘unacceptable’.

The regulator was unimpressed by the presentation of hourly rates. Although the client agreement confirmed the firm charged hourly rates, it gave no example of the type of service and rate charged by partners, consultants, paraplanners or administrators.

When the FCA’s findings were published just a few days later, fee disclosure was a recurring theme among its criticisms.

June

Remember that imminent Frenkel Topping sale we mentioned in April? Well that didn’t happen. The firm announced in June that, while it had found potential buyers, nobody had put up enough money to justify a sale.

It wouldn’t be a month on the Gregorian calendar without mention of the FCA. At the end of June, the regulator unveiled the interim report on its asset management market study, in which it pondered switching off all legacy trail commission for advisers.

The report also made recommendations about all-in fund fees and called for greater transparency for investors.

Former Newcastle striker Alan Shearer (pictured) had a good May as his beloved club achieved promotion back to the Premier League by winning the Championship. He also had success in June, as he reached a £9 million out-of-court settlement with his former IFA Kevin Neale, over allegations of ‘dishonest’ and ‘careless’ advice.

Another person who had a good June was Jeremy Corbyn, as Labour outdid all predictions to stop the Conservatives winning an outright majority in the general election. The party leader capped the month by appearing at Glastonbury.

July

Realising they were in danger of losing the votes of everyone under 40, the Conservative Party decided to offer something to win back support and fight against Corbyn’s resurgent Labour. Just kidding!

In July, secretary of state for work and pensions David Gauke (pictured) told everyone aged 41 and under they would not get their state pensions in 2043 after all. They will now have to wait for their 68th birthday.

Gauke said the decision was made in response to ‘growing demographic and fiscal pressure’. This response to painful fiscal pressure was dismissed by Labour and the Scottish National Party, which both called for the state pension age to remain at 66.

In the same month New Model Adviser® found out just how deep the FCA was delving into DB transfers. Let’s not get carried away, it wasn’t a thematic review. But it was a review of data from some 92 firms, which it followed up with file requests and visits to nine of those businesses.

Later in the year, the FCA explained it was worried about firms moving to a ‘commoditised, industrialised process’ when advising on DB transfers.

August

In August New Model Adviser® cracked it. We can all rest easy now because we finally unravelled the thicket of where SJP’s clients’ fees go, sort of. It turns out the advice giant earns quite a lot from its own fund managers.

The latest financial statements showed it earned revenues of £700.5 million, nearly four times as much as the fund managers it chose, who were paid £183.8 million.

Sanlam came closer to competing with the likes of SJP when it acquired a 158-adviser network of advisers from Tavistock. Readers might recall Tavistock bought the network when it was called Financial Ltd in 2015.

The deal boosted Sanlam’s assets by £1.5 billion and increased adviser numbers at the firm by 158. Not quite SJP-scale yet but getting there steadily, perhaps.

September

If your firm uses the True Potential platform and you didn’t get a place at the company’s CPD event in Berlin, during Oktoberfest, maybe you just hadn’t put enough assets on the platform this year.

New Model Adviser® was amazed to see an email to True Potential advisers reminding them they could be in with a shot to win a place on the trip (complete with a free beer stein). This was contingent on them having written £4.25 million of business on the platform before the deadline. Asked about the risk of incentivising business, True Potential said it was confident it was entirely on the right side of the regulator.

This did not stop commenters on our website criticising the advice firm though.

October

October was a month for the dodgers. Pensions minister Guy Opperman (pictured) pulled out of a fringe event on women and pensions at the Conservative party conference. He did not give a reason for his absence but it may have had something to do with the large Women Against State Pension Inequality (Waspi) group that had gathered outside.

Also in the mood to avoid difficult questions was troubled DFM Beaufort Securities. In October, New Model Adviser® revealed the DFM had written to clients encouraging them to claim against their IFAs over the DFM’s own investment products. Clearly it was eager not to see the claims land on its own door.

There was also one notable goodbye this month, as Aegon announced the Cofunds brand would disappear for the market’s largest platform.

November

The government was not content with one Budget this year, but delighted us with a second one in November. This one was billed as make or break for Philip Hammond as he faced down enemies on the left, right and behind his back.

Somehow he managed to come out unscathed, and even more surprisingly the pensions system did too. There was hardly any mention of pensions in the Autumn Budget. Instead there were a number of policies designed to fix the housing market.

Not one to be out of the headlines for long, SJP was back in the news over an email from its partner firms, which described DB transfer values as ‘irresistible’.

SJP pledged to crack down on the unsolicited email, which talked up the benefits of transferring out.

In November we were also shaken by the tragic news of industry veteran Mike Morrison’s sudden death. Morrison was a true legend of the industry, who will be sorely missed by colleagues, advisers and journalists alike.

December

This month was the crunch time for 40,000 steelworkers. Members of the British Steel Pension Scheme (BSPS) had to decide if they went into the new pension scheme, the Pension Protection Fund (PPF), or take a DB transfer.

But with literally thousands of steelworkers wanting transfer advice, local Welsh firms became ‘overwhelmed’ by demand and closed to new transfer business.

This left many of these steelworkers in a state of ‘panic’, forced to use travelling advice firms who headed across the border looking for business. As leaflets were handed out and ‘chicken and chips’ dinners were used to sell transfers, many had to be reminded we had not travelled back to the 1980s.

If advisers needed any reminder of the dangers of a DB transfer gone wrong, a very revealing one was delivered by NextGen Planners co-founder Adam Carolan (pictured). He revealed how poor DB advice left his father with a loss of nearly £200,000.

In a speech at the NextGen Planners Conference in Manchester, Carolan shared the anecdote of his father’s loss. He said this was the inspiration for him to form the group that promotes young financial planners.

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