The billionaire owner of X (the site formerly known as Twitter) described AI as “the most destructive force in history” following the AI Safety Summit at Bletchley Park in Buckinghamshire.

He added: “There will come a point when no job is needed.

“You can have a job if you want to have a job, for personal satisfaction, but the AI can do everything… one of the future challenges is how do you find meaning in life.”

But his comments were challenged by financial advice expert Vivek Madlani, who claimed that AI will never fully replace the role of advisers.

The co-founder of Multiply, the UK’s first fully automated independent financial advice service, said while frontier technologies such as AI carry risks, the overall impact will be “beneficial for the industry and ultimately society as a whole.”

He said he sees a future where AI democratises access to expert financial advice, empowering more people with the intelligence they need to manage their finances effectively.

Furthermore, he anticipates a significant shift within the advisory sector itself.

“Rather than replacing jobs, we expect advisers who leverage AI tools to replace those who do not, and this will be a transition that will take a long time,” he said.

Madlani also acknowledged the “irreplaceable value of the human touch, especially when addressing the emotional aspects of financial decision-making”.

Meanwhile, co-founder and CTO of Multiply, Mike Curtis, described Musk’s comments as “misguided”.

“Where innovation makes some roles obsolete, it also opens new opportunities for new professions and roles. There is no evidence that AI is any different,” he says.

He added: “We do not see AI replacing all human advisers in so far as they are doing roles that are enhanced by the fact that they are human — e.g. the parts of their role that involve empathy, understanding and a nuanced ability to read their client’s needs and wants.”

This is a view shared by

Tyme Regent Bascombe, financial planning manager at Five Wealth, said: “Financial planning is a trust-based industry, that requires creativity, emotional intelligence, and a human touch.

“In addition, the industry is highly regulated so mass adoption of AI will likely be slower than other industries and may take decades to see noticeable change.

“If AI as Musk suggests does replace all jobs, I think financial planning will be the least of societies concerns.

He said that safety, ethics, and AI biases are all concerns of rapid development, adding that “it is important that organisations, the government and regulators all work together to provide clear guidelines on how to work with AI and help mitigate these risks where possible.”

Financial Technology Research Centre (FTRC) director Ian McKenna said: “The changes Musk describes will take at least 20 and more likely 40 years to transpire.

“If, and it is quite a big if, during that period of time humanity can avoid not wiping ourselves out and we can build in protection to stop machines vastly more intelligent than us from deciding to rid the planet of humans, the future is amazing.”

Advice firms must ‘move quickly’ as Musk challenges financial services

At the summit, tech giants signed a voluntary agreement that they will not release any more powerful AI models until their safety has been tested by governments.

The two-day summit concluded with an agreement to set up a new international panel, comprising of experts from all countries, to produce a report summarising the state of the latest science on AI.

Sunak said: “Until now, the only people testing the safety of new AI models have been the very companies developing it.

“That must change. So building on the G7 Hiroshima process and the Global Partnership on AI, like-minded governments and AI companies have today reached a landmark agreement.

“We will work together on testing the safety of new AI models before they are released.”

Despite Musk’s comments, Sunak downplayed the danger of mass unemployment due to AI, saying: “I know this is an anxiety that people have. We should look at AI much more as a co-pilot than something that necessarily is going to replace someone’s job.

“AI is a tool that can help almost everybody do their jobs better, faster, quicker, and that’s how we’re already seeing it being deployed.”

The theme of AI was one that dominated the agenda at Money Marketing Interactive in London last month, with panellists weighing up the pros and cons.

The benefits were clear — it can automate time-consuming tasks such as report writing, API (application programming interface) creation and minute taking.

This not only improves advisers’ productivity but frees them up to spend more time with clients.

Capital Asset Management chief executive Alan Smith said he believed, from a financial planning viewpoint, AI adoption was “entirely game changing”.

Schroders head of UK intermediary solutions Gillian Hepburn highlighted recent research by the company that revealed 57% of advisers believed AI was a “great opportunity”.

But there was a stark warning that, despite the upsides of AI, it was important to remain cautious and be aware of the dangers.

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Consumer Duty

The Consumer Duty was a very large project for us, as it was for most businesses.

I think on some days we had around 400 people working on it. It was huge and a great deal of work was done. We wanted to build on that.

Essentially, we wanted to ensure we had a sustainable business model for the future. We feel it’s sustainable today, but we wanted to have simpler and more comparable fees. Not so much for clients, because the fees are explained to them. But if you’re not a client our fees could look difficult to understand.

The SJP model

We have always found our model works well for clients and we have continued to grow. We have strong client advocacy, retention rates and client satisfaction.

If I was to stay, I would probably need to sign on for another five years

Personally, I like to know what I’m paying in total, rather than try to work out individual bits, but it’s where the market is going and where consumers are going. It is where regulation is going.

When we go into this disaggregated, unbundled world then it becomes very clear what our fees are for each component. They are set at the right place from value for clients, from the price to provide, but also from market comparability.

Technically, the EWC isn’t an exit fee. I know you might say it looks like one but in effect it’s a way of collecting the initial advice fees.

We are ultimately reducing the total fee so therefore we must become more competitive. And we’re looking to future-proof the business.

Cover story: No way out? SJP sees light on exit fees

Reputation

I think, once these changes are made, the reputational issues are a lot easier to deal with. No one likes reading negative headlines in the press or on social media. I’m sure some potential clients may have read those negative headlines and decided they did not want to choose SJP. The reputational issues and negative stories cannot be positive.

Never underestimate the value of advice. Advice causes action, rather than just sitting there not knowing what to do

The pricing review is a big announcement that couldn’t be communicated to advisers in advance. There were plenty of rumours and speculation in the press so in that sense it isn’t a total surprise.

Everyone is trying to work out what it means. I think that will take time. That is our job with shareholders, partners, employees and also clients — to explain the changes, why we’re making them and why we believe it’s good for the future and good for client outcomes.

We’re looking to get ahead of the game.

Timeframe

The lead time of two years is mainly a systems-related point. We’ve done a big migration in the past six years onto a system called Blue Door. So we’ve got the muscle memory and we are on a modern 21st century platform.

It’s not like we’re trying to do all of this at the same time as getting off a really old system. But it is still a big systems development.

It could be something like 10 million records for our clients.

We are tripling the amount of data that flows through the organisation, and you need bigger pipes. You need more processing power.

We cannot risk getting the IT wrong. There have been plenty of stories in financial services where the IT has not worked and that’s caused consumer detriment and harm.

The academy is enabling us to change the diversity of the adviser base — but that will take time

This announcement has replaced rumour with fact. Removing uncertainty is really important.

Value of advice

It’s important to think about the value of advice and this isn’t just an SJP point — this is a point across the wider advice market.

Never underestimate the value of advice. Advice causes action, rather than just sitting there not knowing what to do.

There’s plenty of research that talks about the peace of mind of advised clients. They feel far more financially secure, knowing that they’ve got a trusted adviser who’s looking after their back.

But there are not enough advisers in the UK, so you have an advice gap. At the same time you have a savings gap, which is continuing to grow.

If you’re not a client our fees could look difficult to understand

And our financial system is quite complex.

The UK needs to close that advice gap. I like to think we are doing our part in terms of the academy. I think the academy is also enabling us to change the diversity of the adviser base — but that will take time.

Retirement

I’m heading into retirement after 31 years with the business. The new CEO, Mark, will assume the role on 1 December.

These changes have got nothing to do with my decision to retire. I’m coming up to 60 next year and my life plan was always to retire around 60. If I was to stay, I would probably need to sign on for another five years.

Essentially, we wanted to ensure we had a sustainable business model for the future

2024 is going to be key for doing the strategy from 2025 to 2030. And therefore I sat down with the chair last year and said, “It’s probably time to hand on that proverbial baton.”

This article featured in the November 2023 edition of MM. 

If you would like to subscribe to the monthly magazine, please click here.

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“Of course, if something happens like SJP scrapping its exit fees, we will need to cover it.”

Full disclosure: I’m not sure the quote is verbatim. But it was words to that effect I said to MM’s new news editor, Dan Cooper, and our chief reporter, Lois Vallely, on 16 October.

Oh, how we laughed.

I didn’t tell them I had typed out the following intro a few days earlier: “St James’s Place will remove its controversial exit fees as part of an extensive overhaul of its charging structure.

Any steps made by SJP in the right direction should be celebrated

“The move appears to have been prompted by the Financial Conduct Authority’s increased focus on fair value for customers as part of its Consumer Duty work.

“SJP held firm with its charging structure when the FCA first revealed its proposals. But, having come under increased scrutiny in recent months, the firm has had a change of heart.”

SJP chief executive Andrew Croft: View from the top

The morning of our flagship event — MMI London — rolls around and guess what happens? We receive a press release on behalf of the advice giant, announcing changes to its charging structures.

This overhaul includes the removal of what SJP calls “early withdrawal charges” (EWCs) — it doesn’t use the term ‘exit fees’. We do, though, as do many others including the FCA.

My speculative intro got put to use before we had welcomed the first MMI delegates through the door at 155 Bishopsgate in the capital on the morning of 17 October.

We are rebalancing our charges so that they better reflect the value clients see

Lois kindly delved in further to the rest of the details contained in the release, so we could get the initial news story up online.

What a start to the day. The topic came up a few times throughout the conference as the audience and our speakers digested the fact we were truly beginning to see the Consumer Duty in action.

And all within just a few months of the 31 July implementation date.

Editor’s view: SJP and FCA can’t do right for doing wrong — but where’s the balance?

But are things moving as quickly as they seem to be? Well, although SJP has revealed its intentions, it doesn’t appear to be in a particular hurry.

The changes won’t be coming in until the second half of 2025 — another two years.

SJP says it is ensuring it will “continue to have a sustainable and competitive charging platform for the long term.”

Shareholder pressure will have played a role in SJP’s actions

It suggests the charges will offer “simplicity, comparability and a continued focus on value for clients”.

Others will argue it should be introducing the changes immediately. Many more will say SJP could have acted years ago.

‘Only 12 years late’

Some readers of Money Marketing have welcomed SJP to the world of RDR (Retail Distribution Review) — suggesting the firm is “only 12 years late to the party”.

Then, of course, we have to consider the fact the changes the firm talks of, in terms of its EWCs, seemingly apply only to new customers.

So there’s plenty of food for thought there on just how fair or good value that is for existing clients within the six-year “gestation period”.

Hopefully, the fact SJP is making changes will remove some of the negativity across the board

The firm has sought to clarify some “misconceptions” since the announcement. It appears the EWCs will tail off eventually. But questions remain. Could customers still feel trapped?

On social channels there have been discussions as to whether the news should be seen as a positive move for the advice world.

Sean Banks, a financial planner at Herbert Scott, posted on X: “Like it or not, SJP is the lens through which many people view the financial planning/wealth management profession.

“Any steps made in the right direction should be celebrated. Regulation apparently doing its job.”

Personal Investment Management & Financial Advice Association (Pimfa) head of public affairs Simon Harrington challenges this view and questions whether those outside the financial advice world are as interested as those within it think they are.

This is a much cleaner fee structure that will be more transparent for clients. They will know exactly where they are

He replied to Banks: “I don’t think this is true. I think SJP is the lens through which people who work in financial planning/wealth management think they are viewed.

“The idea that the various vagaries of charging structures are discussed and understood by the wider public doesn’t register.”

Interestingly, back in late January 2022, MM learned SJP had decided to drop the ‘Wealth Management’ part of its company name in a bid to better communicate its offering. It was part of a revamped brand image — the first upgrade since the firm had been established in 1991.

What changes are coming, then?

SJP has carried out an internal evaluation of its charging structures, which will result in a revised pricing model for most new investment bonds and pensions.

Some of the charges will start to come into effect from 2024. It’s just the whole transition will be in 2025

The firm says these will operate with “an initial charge and ongoing charges applicable from the outset and without any EWCs or gestation period”. It highlights this is already the case with its unit trust and Isa business.

SJP also revealed plans to unbundle its costs so customers can tell what they are paying for. This means charges across all its wrappers, which have historically been disclosed “primarily on an all-inclusive basis”, will be separated into components. These will comprise initial and ongoing advice, investment management, and product administration that will be tiered for larger investment.

“We are rebalancing our charges so that they better reflect the value clients see across each element of our proposition,” the company adds.

SJP says the changes have “naturally” involved engagement with its key regulators.

If this has been brought about by the Consumer Duty then I think the Consumer Duty is doing exactly what it’s designed to do

The FCA wasn’t prepared to go into detail about what discussions with SJP or specific firms had entailed. But the regulator has put a lot of weight behind the Consumer Duty so I’d hazard a guess it came up in conversation a fair few times.

SJP suggests its “continued focus on value and outcomes for clients is consistent with the expectations of the Consumer Duty”. It’s confident its changes will “work well” for clients.

The company highlights that the external environment has evolved and is now increasingly seeking simple comparability of all advice, investment management and other services on a component-by-component basis.

SJP claims clients will see “enhanced value” from the changes with reduced overall ongoing charges for existing client investments across the firm’s core product wrappers.

It is increasingly evident that consumers are seeking simple comparability

Has the company been backed into a corner and realised there is no way out from the increased scrutiny the Consumer Duty brings?

Previously it appeared to be under the impression its charging structure would not be affected by the principles-based regulation.

What is ‘unreasonable’?

The FCA has made it clear financial services firms must avoid charging “unreasonable exit fees” because they discourage consumers from leaving products or services to get a better deal elsewhere.

What commentators may argue the regulator hasn’t been so clear about is what constitutes ‘unreasonable’.

So, in theory, individual firms could say they deem their exit fees to be ‘reasonable’ and that would be the end of it.

The charges will offer simplicity, comparability and a continued focus on value for clients

In practice, it seems that’s not the case. At the very least we know firms would need to justify the reasons for such fees, and maybe that’s easier said than done.

A spokesperson for the FCA tells MM: “The Consumer Duty sets higher and clearer standards of consumer protection in financial services. We recognise that some firms have needed to make significant changes to their business model to improve customer outcomes.”

The changes announced by SJP are extensive and demonstrate the impact the Consumer Duty can have for the benefit of consumers. Make no mistake — the regulator will monitor how those changes are implemented and any effect they have on clients.

And, despite some suggestions the Consumer Duty was introduced purely to change the ways of SJP, the FCA will be keen to see what plenty of other firms decide to do.

Who knows? We may even see this date brought forward if testing goes better than expected

Could SJP’s actions cause a domino effect, with more firms following suit? Once SJP unbundles its costs for a clearer comparison, could other companies come under pressure for being more expensive? The FCA isn’t looking to remove the competitiveness of the market but other practices may be called into question.

Consumer Duty Alliance chief executive Keith Richards tells MM charges across the whole of retail financial services have been under the spotlight for many years.

He says: “Changes in value and methodology can be tracked throughout the past two decades, and further change as a result of the Consumer Duty focus is likely to continue over the coming year.

“Consumer bodies and regulators have been seeking greater transparency and comparability of charges across retail financial services for many years. There is certainly plenty of discussion among advice firms over moves away from ad valorem to other structures, such as fixed fee or time-costed hourly rates.”

I suspect SJP had already recognised the need to transition all clients to the new charging structure once implemented

Richards adds: “The changes to fees and exit penalties announced by SJP recently are very welcome and unquestionably positive early results of the clear focus on the Consumer Duty outcomes, rather than compliance with regulatory rules, which I believe will ultimately benefit the firm, its clients and indeed the wider sector in the long term.

“Whether from regulatory pressure, self-assessment or being under the media spotlight, there is no doubt that shareholder pressure will have also played a role in addressing a long-standing criticism of SJP’s uniquely different charging position as both manufacturer and distributor, fair or otherwise.”

Richards also shares his views on the speed with which SJP plans to implement the changes.

“While some criticism has been levied regarding the implementation timeframe of proposed changes, as well as the suggestion of differential treatment between new and existing clients, it is not unusual for large, vertically integrated firms, or of course platforms, to have to plan and backtest IT system development and align with process changes. Who knows? We may even see this date brought forward if testing goes better than expected.

The changes will reduce the underlying cash result over the next few years before growth accelerates

“I suspect SJP had already recognised the need to transition all clients to the new charging structure once implemented, but it hasn’t quite articulated this point clearly — something I am sure will be rectified.

“There has been no let-up in Consumer Duty activity over the summer months and the coming months look set to become just as busy as the sharing of good practice, FCA assessment and thematic work is likely to drive further action.  As with the RDR, for many firms the Consumer Duty has served to accelerate change already in progress.”

Brand reputation

SJP states its charges “will continue to compare favourably with competitor rates available in the marketplace”. It claims this represents “good value for the high-quality service” it provides alongside its partners.

“This will support our brand and reputation in the marketplace, which will, in turn, benefit the partnership,” the firm says.

Consumer bodies and regulators have been seeking greater transparency and comparability of charges across retail financial services for many years

But SJP does acknowledge such changes could result in some pain for shareholders in the short term.

It says: “For shareholders, these changes and the associated implementation costs will affect the shape of the cash result in the future. The changes will reduce the underlying cash result over the next few years before growth accelerates over the medium term and beyond, aligned with the development of total group funds under management.”

The company will now need to commence a “broad and complex programme” to accommodate these changes. Next year it will introduce changes to its fund charges (see table example below).

Fund charges illustration

Source: SJP

It anticipates it must spend in the region of £140m–£180m before tax to implement all the changes it has announced. About £10m will be spent over the remainder of 2023, £95m in 2024 and the balance in 2025.

Parting gift

With SJP recently revealing its succession plans for departing chief executive Andrew Croft, there had been talk of whether his replacement, Mark FitzPatrick, would be the one to shake things up.

The changes to fees and exit penalties announced by SJP recently are very welcome

Did Croft want to give the firm a parting gift?

On 17 October Croft said: “The changes announced today are about positioning our business for continued success by putting in place a future charging structure that reflects the evolution of consumer engagement with retail financial services, and is aligned to the long-term value that we deliver to clients through the partnership.

“We have always been confident that SJP offers its clients real value that helps individuals and families achieve financial wellbeing. However, it is increasingly evident that consumers are seeking simple comparability, and this has been reflected in regulatory trends too, as highlighted with the assessment of value and the Consumer Duty regimes. The review of our charging model reflects these developments.”

We should start seeing good things happen with SJP fees from next year

He added: “I am confident that SJP’s ability to both deliver and demonstrate value in the future, with this sustainable model of charging for our end-to-end services, is good for clients and represents an exciting opportunity for SJP.”

SJP says it has £158.6bn of funds under management and more than 900,000 clients. It says throughout its history it has evolved to meet changing client expectations and developments in the industry and regulatory landscape.

Changes welcomed

The changes have been welcomed by the founder and managing director of Oakmere Wealth Management — a partner practice of SJP.

Carla Brown tells MM: “My thoughts are that change is welcome. It’s about us demonstrating value to our clients and being much more transparent, which I think is a good move.

We [FCA] recognise that some firms have needed to make significant changes to their business model to improve customer outcomes

“I think it’s going to be in the best interest of both clients and partners because it’s going to make it much easier for us to explain to our clients; it’s going to remove a lot of the negative interest we have attracted recently.

“If this has been brought about by the Consumer Duty then I think the Consumer Duty is doing exactly what it’s designed to do, which is a good thing.”

Talking about the removal of the EWCs and the discrepancy this may cause between existing and new clients, Brown adds: “Clients who have EWCs currently will not have paid any initial advice fees. It would be unfair for them to be removed as new clients going in will be paying initial advice fees.

“The advice has to be paid for somewhere so it would be unfair to new clients if you took it off the old clients because then it means the old clients haven’t paid for advice. These things often get misinterpreted.”

She continues: “Do I wish the pace of change was quicker? Yes, of course I do. But I understand the system issues that are going to take time to be addressed. Some of the charges will start to come into effect from 2024. It’s just the whole transition will be in 2025. We should start seeing good things happen from next year.”

Our continued focus on value and outcomes for clients is consistent with the expectations of the Consumer Duty

Brown explains how it all happened quickly and advisers were informed about the changes when the markets were told.

“We had no prior warning. You do hear things on the grapevine, but we were informed at the same time as the markets because obviously it is market-sensitive information.”

She says communication came out in the days following the announcement and support has been provided to advisers, with webinars and other materials to help conversations with clients. Communication has also been sent to clients directly so they are aware of what’s happening.

She acknowledges change can be scary for people but also suggests there is a place for EWCs.

“Over a longer-term investment, clients would have been better off with an EWC. If they are going to keep the money in for over six years, ultimately the client would have been better off.

Like it or not, SJP is the lens through which many people view the financial planning/wealth management profession

“But I appreciate it can muddy the waters. It’s not especially transparent. I think this is a much cleaner fee structure that will be more transparent for clients. They will know exactly where they are and there is less chance for misunderstandings.”

Brown hopes to see the Consumer Duty prompt other companies to act too. She explains the unbundling of SJP’s charges is welcome because it’s aligned with competitors and will allow the firm to be seen on a like-for-like basis.

“Traditionally it has been seen as quite opaque,” she explains.

“Actually, what’s important to clients is trust — it’s about the relationship and we’ve got so many happy clients it just demonstrates that we are doing a really good job.”

She argues the negativity surrounding SJP can be damaging to the advice profession as a whole — along with arguments between IFAs and restricted advisers.

“It damages public trust because we should be seen as a professional service that looks at itself in a professional manner. If we’re all bickering and fighting and trying to score points, it doesn’t come across that way.

The idea that the various vagaries of charging structures are discussed and understood by the wider public doesn’t register

“Hopefully, the fact SJP is making changes will alleviate some of that and remove some of the negativity across the board.”

Brown also highlights the positive movement SJP is trying to bring to the wider advice profession with its academy, which, along with others, brings greater diversity.

Could the move on fees be what the company needs to shift the conversation away from it, or at least help it to be seen in a more positive light?

I’m not sure we can handle any more big announcements that clash with an MM event.

This article featured in the November 2023 edition of MM. 

If you would like to subscribe to the monthly magazine, please click here.

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The initiative, “Designed by Doctors” is a series of recommended and updated examples of CI definitions covering conditions such as heart attacks, total permanent disability and multiple sclerosis, among others.

The ambition is to improve the clarity of policy wordings to ensure alignment with the latest medical practice.

Protection Guru said it has brought together an independent medical committee of doctors and epidemiologists to create new example wordings for CI policies.

The committee revisited 10 CI conditions to identify unnecessary complexity and obsolete medical terminology.

The move has been welcomed by the likes of The Consumer Duty Alliance and LifeSearch.

Protection Guru said CI policies, which are legal documents and by nature must include complex medical terms, should be easy for qualified medical professionals to understand, which is not always the case.

It added that this is the test the medical committee has applied in creating these new standards.

Protection Guru founder Ian McKenna said: “By producing our example wordings for clarity and accuracy, we can offer insurers and reinsurers impartial guidance on keeping their policies in line with contemporary medical practice. Since we launched our original critical illness benchmarking in 2017, we have been able to work with many individual insurers to simplify and improve wordings for consumers. This is the next phase of this work through which we are looking to raise standards across the industry.”

He added: “It is crucial to recognise we are not seeking to encourage adoption of a single or standard CI wording. That would be counterproductive. Stimulating competition is core to our objectives. We are, however, looking to demonstrate that wordings can be better than they are today.

“As CI policies were originally invented by a doctor, the late Marius Barnard, we see reengaging with medical professionals as a very natural step to protect consumers.”

Zurich launches ‘flexible’ critical illness proposition  

Critical Illness wordings were first benchmarked in 1991 by the National Federation of independent financial advisers, which subsequently became the IFA Association and IFA Portfolio.

Adviser firms using the Protection Guru Pro service will next year be able to use a “Designed by Doctors” assessment when recommending insurers who meet the medical committee’s benchmarks for clarity and reflect latest medical practice.

Commenting on the new wordings, Dr Adam Hazel, chair of the Protection Guru independent medical panel and founder of Harley Street-based Tyburn Medical Practice said: “Medicine, diagnostics and treatment is moving at a pace never seen before and is continuing to accelerate. It cannot be in the interests of consumers for policy wordings to be based on measurements and diagnostic techniques that the medical profession has moved on from.”

Johnny Timpson, the Financial Inclusion Commissioner added: “Consumer research has shown previously that one of the reasons consumers buy critical illness plans is the certainty of a payout they can rely on. This only works properly for them if we keep wordings as clear as possible and in line with medical practice. It is essential the definitions are both accurate and keep patient outcomes front of mind.”

McKenna stressed this new work does not conflict with the existing work by the Association of British Insurers on minimum standards which was passed over from the IFAA in 1999.

He said he does not expect every company to use the same wording as that would “stifle innovation”.

This work has been a few months in the making and Protection Guru plans to expand from the initial 10 conditions later down the line.

It said it will prioritise the conditions which need the most change and are most likely to involve a claim.

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The fund administrator gave the update in a letter to investors published today (7 September).

Link Fund Solutions had previously agreed to a scheme arrangement where it will compensate investors.

The reserve amount has been set at £50m but will be reviewed by Link and the supervisors of the scheme.

Link currently estimates that the total amount of the settlement fund will be up to
£230m.

And that the first distribution from the settlement fund will be between
£180m and £200m.

AJ Bell head of investment partnerships Ryan Hughes said: “Investors will be pleased to see further details regarding the redress scheme on the Woodford Equity Income fund which sets out the potential amount available for distribution and the timeframe around this.

“This is an important next step for investors looking to be compensated for the failure of the fund, with c£230m being earmarked as available for investors who held the fund at the point of suspension on 3 June 2019.”

He added while this remains subject to the successful completion of the sale of the Link Fund Solutions business and the approval of the scheme by investors.

The communication of additional detail should prove to be a strong indicator that the sale is close to completion.

Investors will now need to think carefully about how they wish to vote on the proposed scheme, which will happen towards the end of the year.

He continued: “Should these two key steps be successfully completed, investors should get a first tranche of payment in the first quarter of 2024, which looks like it will make up the bulk of the redress.

“However, there will likely be a further payment or payments to a much lesser degree at some point later in 2024.

“As a result, the light at the end of the tunnel for investors is coming much closer into view, but there is still a high probability that this will not be fully completed until at least the middle of 2024, at which point five years will have passed since the suspension.

“Investors have been hugely patient in this long, drawn out process but hopefully they can genuinely see an end is in sight.”

However, lawyers representing thousands of investors trapped in the fund formerly run by manager Neil Woodford, have criticised the compensation scheme.

They have accused the FCA’s guidance on the proposed settlement scheme as containing a ‘huge black hole’ which makes it impossible for victims to make an informed decision. 

Law firm Harcus Parker says that it believes that the vast majority of its clients would be better off claiming a refund through the Financial Services Compensation Scheme (FSCS). 

Daniel Kerrigan, a partner at Harcus Parker which represents 7,500 Woodford fund clients said: “I cannot understand how the FCA allows this guidance to be sent to investors without first establishing whether these victims of the fund have a right to make a claim from the FSCS. 

“It seems to me that this letter is trying to sweep the FSCS compensation issue under the carpet but instead its just left a huge black hole.

“If investors don’t know if they can claim from the FSCS it makes it impossible for them to make an informed decision. We have serious concerns that, as Link has suggested they will, investors will lose their right to claim from the FSCS if the scheme is approved.” 

He added: “We have written to the FSCS to ask them to determine whether investors will have a right to compensation, which we firmly believe that they should, but have not heard back. 

“Nearly all of our clients will have investments under the £85,000 compensation threshold so would be able to be fully refunded.   

“There’s a wider issue here of the FSCS existing to give confidence to the market if things go badly wrong. I question how the FCA can act as a negotiator and a regulator at the same time.” 

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August top 10 stories

The Consumer Duty should end active management

The Consumer Duty, which sets higher and clearer standards of consumer protection across financial services, should put an end to financial advisers putting their clients in active funds. This is because passive funds, which track a market index, have been shown to outperform active funds over the long term. Rockwealth head of client education Robin Powell said that it is becoming harder to make a case for active management, and that many financial advice firms are still advocating it despite the evidence.

Aegon UK takes on Nationwide’s financial planning service

Aegon UK has extended its strategic partnership with Nationwide Building Society to take on the building society’s existing financial planning service. The transfer is expected to be completed in early 2024, at which point the ongoing financial planning needs of around 90,000 customers will move to Aegon UK. Aegon UK will continue to be the Isa and general investment account provider of choice for all Nationwide customers.

State pension set to rise as wage growth hits 8.2%

The state pension is set to rise by £869 next April to £11,469, as average pay including bonuses hit 8.2%. The rise in average earnings between April to June 2023 could see the state pension increase by 2% higher than expected by the chancellor at the time of the Budget. The rate of increase will depend on the highest of three numbers: the rise in average earnings, the rate of CPI inflation and a floor of 2.5%. The rise in average earnings for the months May-July 2023 will be published in September 2023.

Hartley Pensioners will not be paid this year

Hartley Pensions clients are unlikely to be paid any money this year, according to its administrators UHY Hacker Young. This is due to a court application that aims to confirm the administrators have permission to impose wind up charges. The transfer out process is likely to commence from December 2023 onwards. The administrators are still working on the court application and expect it to be heard in November 2023.

Evelyn Partners completes succession deal

Evelyn Partners has announced the completion of a deal that will see the team from boutique wealth manager Millen Capital join its Liverpool office. The deal will see a total of five people move across from Millen Capital to Evelyn Partners, as part of its succession planning scheme for business owners. Evelyn Partners, which was created from the merger of Tilney and Smith & Williamson in 2020, has deep roots in Liverpool with the former company having been founded in Liverpool in 1836.

Monzo moves into pensions market

Monzo is on the hunt for a pensions product manager to join its newest savings and investment team. The digital bank is looking to launch a pensions product in the next few months, and the product manager will be responsible for leading the development and launch of the product. The ideal candidate will have experience in the pensions industry, and will be able to build a product that is both user-friendly and meets the needs of Monzo’s customers.

Abrdn’s advice arm sees £600m in outflows

Abrdn’s financial advice business has reported net outflows of £600m due to tough “market conditions” and changed customer habits from the cost of living. The outflows were partly due to the short-term impact in H1 2023 from the “technology upgrade” of its Adviser Experience Programme in February.

Quilter edges ahead with platform assets

Quilter has edged ahead of Abrdn to become the largest advised platform in terms of assets under administration (AUA) over the past quarter. Quilter had £69.4bn AUA for the period ended 30 June, whereas Abrdn’s figure stood at £69.3bn. Quilter’s platform upgrade is believed to have helped with its performance.

FCA delays simplified advice plans

The Financial Conduct Authority (FCA) has delayed plans to create a new “core advice” regime amid a lack of support. The FCA had proposed to introduce simplified advice for investing into mainstream products, specifically within stocks and shares Isas, but this did not receive backing from the industry. The FCA will now look at simplified advice in the context of a wider review about where the advice vs guidance boundary should lie.

Govt sets out plans to ban all cold calls for financial products

The government has launched a consultation to ban cold calls for all financial products in a fresh crackdown on scam calls. The consultation, which runs until 23 September, will look at banning cold calls for products such as pensions, insurance, mortgages, investments, and credit. The government says that cold calling is a “major source” of fraud, and that the ban would help to protect consumers.

The post Video: Money Marketing’s most-read stories of August 2023 appeared first on Money Marketing.

In an update today (1 September) the regulator said it required nine firms to provide it with fair value assessments.

This follows concerns that not all savers are getting good deals and the introduction of the Consumer Duty in July.

A month ago the FCA outlined a 14-point action plan to ensure people can access a competitive savings market.

According to the regulator it has seen an improvement in the market since the plan was published.

There is a greater availability of higher interest rates in both term limited and easy access accounts.

And the FCA has also seen moves by some savings providers to align the rates available on accounts currently on sale and those now closed.

“We welcome the development of a more competitive market and encourage people to shop around for the best deal,” it added.

At the launch of the 14-point action Sheldon Mills, executive director of consumers and competition at the FCA, said: “We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates.

“We welcome the progress that has been made so far but this needs to speed up. We will be using the Consumer Duty to ensure this is the case – with firms required to prove to us that they are offering their customers fair value.

“We continue to urge savers to shop around to take advantage of the increasing number of better saving deals available.”

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Good morning and welcome to your Morning Briefing for Friday 25 August 2023. To get this in your inbox every morning click here.

Fund success

Some journalists like to draw analogies between sport and investment.

Here is one: a winning rugby team – much like a winning investment portfolio – needs a diverse mix of talent.

Liontrust roars

Some deals that fall through are good for your share price.

Liontrust’s failed takeover bid for GAM boosted its share price by 10.0% yesterday morning.

In a note Peel Hunt, a specialist UK investment bank, explained why.

Retirement dates

One of the milestones in life is retirement.

A firm retirement date obviously provides a clear focus for retirement planning but those in the advice profession say it is not essential.

What do you think?

Quote Of The Day

August has been a washout for the high street as shoppers have turned increasingly cautious, with households’ budgets facing a big squeeze

– Susannah Streeter, head of money and markets, Hargreaves Lansdown on the tough retail climate

In Other News

The Pensions Regulator (TPR) has updated its guidance to help defined contribution (DC) schemes comply with new regulations designed to ensure they consider all the investment opportunities available to achieve best value for savers.

From 1 October 2023, trustees must state their policy on investing in illiquid assets in the statement of investment principles for their scheme’s default arrangements.

Illiquid assets are those that cannot easily or quickly be sold or exchanged for cash and include any such assets held in a collective investment scheme.

Louise Davey, TPR’s interim director of regulatory policy, analysis and advice, said: “Trustees have a duty to savers to act in their best interests. That means working hard to deliver the retirement income that savers expect, including properly considering the full range of investment options. Our updated guidance helps trustees make these often complex decisions.”

Trustees will also be required to disclose the asset class breakdown for each of their scheme’s default arrangements in the chair’s statement.

The new regulations have also removed a regulatory barrier that may have hindered trustees from exploring investment in certain funds that came with performance fees.

Since 6 April 2023, trustees have had the option to exclude specified performance-based fees from the list of charges falling within the regulatory charge cap limit of 0.75% per annum.

To ensure transparency, schemes must disclose in their chair’s statement any performance-based fees incurred in relation to each of their default arrangements, calculated as a percentage of the average value of the assets held in those defaults.

Trustees must robustly assess the extent to which these fees represent good value for their savers alongside other costs and charges.

Did You See?

Earlier in the week Kim Dondo dove into market trends and insights with special guest Michael Field, European Equity Strategist at Morningstar.

In this episode, they covered various topics that shed light on the current market scenario and provide valuable guidance for investors and financial advisers.

The post The Morning Briefing: Fund managers and Liontrust roars appeared first on Money Marketing.

The multinational wealth management company used behavioural science principles to create a framework for advisers to assist them to meet the Consumer Duty’s ‘Consumer Understanding’ outcome.

Quilter has named the framework CLEAR, which is an acronym of Capture my attention, Lighten the load, Explain what it means for me, Arrange the content simply and Reassure me.

Within each element of CLEAR, Quilter has provided advisers with two behavioural science techniques.

The business stated these will help advisers meet the Consumer Duty rules when supporting customers to make effective decisions.

The Consumer Duty highlights five points which represent good practice – engaging, layering, simple, relevant and well-timed.

Quilter is in the process of adopting the CLEAR framework for all of its client-facing materials it produces. It also uses consumer testing of its materials to understand the impact of these communications.

Quilter marketing director Jeremy Mugridge said: “The Financial Conduct Authority has set a clear expectation within its Consumer Duty about how providers should be supporting customers in their decision-making process.

“Client communications are critical to this and very easy to get wrong. As a result, we wanted to share a few simple and practical tips with advisers to not only get their communications working as the FCA would expect, but also working better for their business.

“Using behavioural science is a great way to remove some of the psychological barriers and harness the behavioural drivers that humans naturally have in order to promote better understanding.

“We have seen a great response in consumer testing on our communications as a result of the CLEAR principles. Not every principle of CLEAR has to be used every time, but it will provide advisers with a straightforward and easy to use framework for both regular and ad-hoc communications.”

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