As the new year’s resolutions are being dutifully pursued across the country and the nights are finally getting shorter, it is worth reflecting on some of the key financial events from 2018 that will continue to shape 2019.
The British Steel fiasco involving its £14bn pension fund, in which 124,000 scheme members endured a 10 per cent cut in benefits to enable the steel giant to return to profit, dominated headlines at the start of 2018 and will continue to have implications for the advice profession from both a PR and financial perspective.
Continued regulatory hardening has mounted more pressure on financial institutions, necessitating an evolution of the role they play and political pressure is adding more fuel to the fire.
The introduction of Mifid II introduced greater transparency across the market, which threw increased focus on charges and value, challenging profitability and perpetuating price competition, something that will continue to attract attention during 2019. Furthermore, adjustments to General Data Protection Regulation placed an extra burden on smaller firms to fulfil the intricacies of data management in the modern information age.
Brexit-heavy concerns
Continuing uncertainty around Brexit negotiations has undoubtedly weighted down the stock market, business investment and consumer spending.
This year there is a risk that pensions could fall victim to ongoing Brexit negotiations, with Britons living abroad potentially in danger of having their pensions frozen.
Brexit will continue to be the ‘elephant in the room’ for financial planners, and anyone who claims to know what Britain’s relationship with the EU will resemble one year from now must have a crystal ball.
Key Points
- DB transfers will continue to be a hot topic in 2019 after the FCA’s ‘flawed’ review
- Ongoing uncertainty around the terms of Brexit will be the ‘elephant in the room’
- Intergenerational wealth and rebuilding the industry’s reputation should keep advisers busy this year
Our profession must continue to defend robustly its relevance and integrity, irrespective of the outcome of the ongoing Brexit talks. But much as it did throughout 2018, the personal finance profession is best advised to avoid reacting to all the political trials and tribulations in Westminster and Brussels and, instead, focus on what it does best: providing dependable financial planning to those who need it.
The Financial Conduct Authority released the results of its pension transfers review as the year drew to a close.
According to the FCA, less than 50 per cent of advice given was deemed suitable. Prime Minister Theresa May echoed the scaremongering, issuing a warning that HM Treasury and the FCA would clamp down on “rogue” advisers.
But behind the headlines lay integral flaws in how the review was conducted. Fewer than 20 firms were chosen, specifically for being the most active ones in the market and, of course, regulators specifically target what they believe to be higher risk firms or ones where they have received intelligence from other sources.
This was an insufficient sample size to fairly evaluate the performance of the sector as a whole – and by focusing solely on the most active firms the review distorted the wider picture.
Recent concerns surrounding defined benefit transfers set off alarm bells for professional indemnity insurers, leaving many advisers facing increased premiums and excesses – and in some instances, no ongoing cover.
