Back to the future

Panacea comment for Financial Advisers and Paraplanners

9 Oct 2017

Back to the future

Another major brand has announced that it is about to increase its financial planning operation with a hire of some 30 new advisers and another 70 next years. A sure sign that the 2017 advice gap provided both opportunity and a solution to dealing with the thousands of disenfranchised customers of major, highly reputable brands who have to find a way to service former IFA clients who no longer have an IFA, having fallen victim (if that is the right word) to IFA segmentation since RDR.

In 2011 I noted there was growing concern about what consumer reaction would be to what has now been done in their name by the then regulator, the FSA.

I observed that as there were only so many high-net worth clients out there, what will happen to the mass market advice model, and asked what will happen to the “orphan clients”? Will we see the return of the “Man from the Pru” and provider ‘sales’ forces?

It would seem I was right some six years later.

Trade press of 4th March 2010 alerted readers to a then quite astonishing admission by the FSA’s then Head of Investment Policy Peter Smith.

It reported that when speaking at a Chartered Institute for Securities and Investment Private Wealth Management Conference in London, he spoke about the potential for consumers rejecting the big idea about adviser charging and confessed, “If consumers still do not want to engage with it then we probably will have to do something else.”

This really beggars belief. The various discussion and consultation documents have thrown up numerous proposals, many of which have been dropped, reformed or deformed and it is absolutely clear that much RDR directional thinking had been navigation at sea with only a world atlas to chart the way- something that will give a general idea of what landmass is where but zero detail about the hazards presented by the ocean the vessel is travelling on.

This may be acceptable behaviour in regulation-world but let’s not forget that it is the advisers and consumers whose boats would be heading for the rocks.

It was clear in 2010 that the regulator failed to understand the psychology of adviser/client interaction. In 2011 it was the same but it has no intention of listening to the responses from experienced industry navigation professionals, providers, lawyers, MPs, trade bodies and of course advisers.

Not content with being the body that was asleep at the helm when Northern Rock slammed into the rocks followed by the rest of the UK banking “Armada” it seems the FSA also wanted to be remembered as the quango responsible for the decimation of retail financial services.

With all this in mind, perhaps we should look back to 17th June 1999 and the Commons 1st reading of the FSMA 2000 bill and ask the question, why does nobody in regulation ever learn from it’s past mistakes.

The transcript of this debate from 1999 highlighted  so many issues of concern that were expressed then with the seemingly strange phenomenon in the regulatory world of foresight!

Nobody listened then and I am reminded of the quote from the late Bob Monkhouse when thinking about the impact of poorly thought out regulation upon the consumer of tomorrow “They laughed when I said I was going to be a comedian. Well, they’re not laughing now”.

The industry is not laughing now, neither was the mass-market consumer after the 1st January 2013.

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Buzzwords

Panacea comment for Financial Advisers and Paraplanners

20 Sep 2017

Buzzwords

buzzword is a word or phrase that becomes very popular for a period of time. Buzzwords often derive from technical terms yet often have much of the original technical meaning removed, being simply used to impress others. They started to appear in the 1960’s. 

‘Learnings’ is a buzzword, it has become very popular in the world of accountability, liability and in particular regulation.

There are some excellent examples of the use of this particular buzzword. It will often be found in sentence constructions from governmental organisations and official public bodies. For example, ‘there are key learnings to be had’, an ‘enquiry is needed to discover what learnings can be made’, or ‘we will apply these learnings immediately’.

The definition of what it implies and what the ‘outcome’, another buzzword meaning ‘the way a thing turns out; a consequence’,  are actually two different things.

We hear that word ‘learnings’ a lot at the moment. It can be heard in relation to regulation (as a catch all industry in its own right) law and order, healthcare, disasters, failures of …well anything in general really that involves collective responsibility or blame when the reality is that no person ever ends up being fingered for blame.

‘Learning’s’ and ‘outcomes’ are often linked to the word ‘vulnerable’, meaning to be exposed to the possibility of being attacked or harmed, either physically or emotionally creating a verbal triptych’.

So when you hear these three words in the same sentence (they often form part of a BBC interpretation rather than a factual report of a news event) give it a little thought and a wry smile.

Why?

Because ‘learnings’ never ever happen. If they did we would not hear the mantra being chanted every time something goes wrong, as a form of absolution, as in it is not my fault.

Outcomes should lead to a learning; again they never do for the same reason.

They do not even lead to an intervention, more of that word another time.

And the ‘vulnerable’ are a growing collective in society. The word is overused, miss-applied and has become meaningless as we have become anaesthatised by hearing it so much, the vulnerable’ of the world must now outnumber those that are not.

In the world of financial services regulation, not a day will pass without reading, seeing, hearing all these words, individually, in pairs or a full blown broadside of them.

And with such overuse, they have no meaning, no empathy, no humility and no sincerity any more. Next on the radar is ‘our thoughts and prayers go to’!

Money laundering and the Premier League

Panacea Comment for Financial Advisers and Paraplanners

4 Sep 2017

Money laundering and the Premier League

‘Some people believe football is a matter of life and death. I’m very disappointed with that attitude. I can assure you it is much, much more important than that.’ Bill Shankly

And it would seem to be as true today as it was then, but for very different reasons.

A staggering £835m was spent in total by all 20 Premier League clubs during the August 2014 transfer window which was over 30 per cent up on the previous record of £630m which was recorded during the last summer window in 2013.

The August 2017 transfer window has just closed and as the transaction fog clears it seems that over £1.47bn has been spent by UK clubs on ‘buying’ players to ‘kick a ball about’.

Wages are of course on top.

In the 206/17 season some £2billion was paid to players in England’s Premier League, some 61% of turnover. The top five clubs account for half. Clubs like Manchester United, Chelsea and Liverpool have an average wage bill of over £200m.

In any other business environment figures like this would doom any business to failure, and very quickly. But not football. And it would seem that the majority of clubs making a loss are ‘foreign owned’.

According to the Financial Action Task Force (FATF) in the past two decades, “football has changed from a popular pastime into a global industry. With the growing economic importance of football along with other sports, the investment of money into the sector has increased exponentially, and some of this has criminal connections”.

The FATF recently completed a study to determine what makes the football sector attractive to criminals.

It is a globalised sport and some 250 million people play – according to FIFA the 2014 World Cup reached 3.2 billion viewers, one billion watched final.

Despite rapid growth and the very high level of global visibility the Premier League football sector has, UK’s football’s regulatory structure, and that of others in world football has still not yet caught up with some of the risks that come with these changes.

Europol, for example, recently dismantled a Russian money laundering exercise in Portugal.

It seems that the techniques used by the laundering community can be summarised in a simple four-step ‘wash and dry cycle’. I am sure these four simple steps will ring some bells and identify club examples near you.

  1. Find a football club in real financial danger of collapse
  2. Gain access to the club boardroom, garner trust by making some short term donations or investments into the club
  3. Then, after a while, buy the club using funds sitting behind a myriad of opaque holding companies often owned by offshore shell companies
  4. Then you are off to the laundry. You get busy over or under valuing players on the transfer market, negotiate purchase structure of TV rights, engage in ancillary betting activities etc

We live in such a highly regulated world. How is it that:

  1. buying a car,
  2. getting a mortgage,
  3. selling a house,
  4. opening a bank account,
  5. arranging a loan,
  6. getting connected to a utility supply,
  7. becoming a client of a financial advisory firm,
  8. becoming a regulated firm with the FCA  (the list is endless

the process can be so convoluted by time consuming checks and proofs?

Yet a football club deciding to spend £75m on a twenty something football player (who in a gentler age Don Revie would describe as “When he plays on snow, he doesn’t leave any footprints”, almost overnight on the 31st August, is so ‘simples’.

Does anyone out there know?

Holly came from Miami FLA

Panacea comment for Financial Advisers and Paraplanners

24 Jul 2017

Holly came from Miami FLA

Last year we noted some startling news that women having NHS funded sex changes were also being given NHS fertility treatment so they can have babies after they become men.

The next step in this odyssey seems to be that the transgendered woman (now to be legally recognised as a ‘man’) whose frozen eggs have been used to create a baby should be ‘legally recognised’ as the child’s father, rather than their mother.

Still with me?

So the direction of travel with this interesting journey seem to be requiring a compass reset with the statement from the Minister of Women and Equalities, Justin Greening MP, who said she wanted to cut the stigma faced by transpeople.

Government plans would see “adults choose their sex legally without the need for a medical diagnosis of gender dysphoria”.

A report went on to say that:

“Men will be able to identify themselves as women – and women as men – and have their birth certificates change to record their new gender”

The world has come a long way from the ‘boomer years, light years in fact from my parents generation.

Lou Reeds iconic song is now very real life it would seem.

“Hitch-hiked her way across the U.S.A.
Plucked her eyebrows on the way
Shaved her legs and then he was a she”

Suzanna Hopwood, a member of the Stonewall Trans Advisory Group, said: ‘The current system is demeaning and broken. But where is this brave new world thinking sending us?

We have schools setting policies for ‘transgender equality’ by way of gender-neutral uniforms and toilet provisions.

Southampton University’s Student union demanded that sanitary bins be installed in male toilets for transgender men who menstruate. Staff at a Swedish kindergarten were told not to refer to children as ‘him’ or ‘her’ to avoid stereotyping and TFL is doing away with referring to passengers on the tube as ‘Ladies and Gentlemen’.

Before anyone gets ‘offended on someone else’s behalf’, a serious question. How common is the non-binary gender in the UK? This being defined as a person whose “self-identity does not conform unambiguously to conventional notions of male or female gender”.

The Gender Identity Research & Education Society (GIRES) estimates that barely 1% of the British population could be gender nonconforming to ‘some degree’. The numbers of trans boys and trans girls are about equal. That is some 640,000.

At the end of 2014, most reliable figures indicated that at least 0.4% of the UK population defined itself as non-binary when given a 3-way choice in terms of female, male or another description.

That’s about 256,000.

To accommodate the needs and rights of this very small societal group, there are three UK Gender Recognition Registers, not by gender choice but by region (England and Wales together, Scotland and Northern Ireland) and anyone with a UK birth certificate who is issued with a ‘Gender Recognition Certificate’ is entitled to a new birth or adoption certificate, which is recorded in one of those Gender Recognition Registers.

As of the end of June 2015, since the Gender Recognition Act 2004 came into force in April 2005:

  • 4,631 new birth certificate applications have been received
  • 3,999 full Gender Recognition Certificates have been issued by the GRP
  • 183 interim Gender Recognition Certificates have been issued by the GRP (67% converted to full GRCs)
  • 193 applications have been declined
  • 110 applications are still pending

A survey found that 48% of ‘trans people’ under 26 had tried to commit suicide, 30% done so in the past year and 59% said they had at least considered doing so, presenting an interesting factor in life insurance underwriting?

So irrespective of any readers personal views on the matter, which will be a spectrum ranging from incredulity as to how such a very small percentage of the population has developed such a powerful, possibly disproportionate influence, to the deep concerns felt by many that those affected can live in a very dark and confused place needing help.

The issues for the financial services industry that arise from this could be considerable.

The gender directive had serious cost implications for all insurance products, seeing the costs of protection for women increase to the same level that men pay, despite life expectancy being so different.

How will a ‘transgender’ or ‘non-binary’ be underwritten when you can now decide your own gender or change it yourself or possibly even change it back?

Germaine Greer got in a lot of trouble last year when giving a lecture at Cardiff University. She said “Just because you lop off your penis and then wear a dress doesn’t make you a ******* woman,”.

She has a point- genetically and chemically.

DNA (deoxyribonucleic acid) is found in just about all-living things and is the main component contained within chromosomes. It is the carrier of the genetic code that identifies the unique, distinctive and very importantly, unchangeable human male and female characteristics meaning that if you are ‘Arthur’, ‘Martha’ or travelling in-between, the transgender DNA remains as the definitive marker that just cannot be changed.

What about transgender underwriting for Annuities, Healthcare, Critical Illness, clearly a potential problem, particularly if ‘parts’ have been added or taken away?

LV= explained that “our underwriters take into account someone’s current gender. So if someone is transgender that will not be an issue at all, there is no additional loading or special treatment.

The only issue would be if they’re still having treatment (which is the same as anyone undergoing medical or psychological treatment), so if they’re in counselling then mental illness might be excluded but this is a general thing not specific to transgender people”.

Royal London said that “We are happy to consider all applications for cover for people who are transgender. 

Males and females will pay the same premium for insurance cover with Royal London, meaning that a customer can apply for cover as male or female depending upon their gender identity and not their biological sex.

If a customer has already had gender reassignment surgery and has made a full recovery with no complications, all covers including critical illness will be accepted at standard rates.

If the customer is due to undergo surgery, we will usually postpone cover until after the operation due to the potential medical and surgical complications, the same way we would for any customer awaiting any major surgery. But again, once a full recovery has been made with no adverse reactions to treatment received such as hormonal therapy, all covers including critical illness will be accepted at standard rate.. 

If the customer has any other medical history, this will be underwritten using our usual underwriting philosophy applied to all customers”.

Just’s view was that “ gender will make no difference to the price offered to the customer, as all rates are priced on a unisex basis. We offer customers the choice on how they are addressed.”

Male drivers pay more for car insurance than their female counterparts – despite strict gender equality laws – due to a loophole that lets firms charge more based on a person’s job.

But what about the European equality laws, these did not seem to factor in- the ‘Lola’ driver?

Will non-binary be built into robo-advice algorhytmns and proposal forms?

With all this in mind, Oxford City Council is to add on it’s official forms the gender-neutral option of “Mx” as it considers whether all title salutations should disappear.

Even traffic lights have not escaped being politically correctly  re-engineered with the traditional green man sign replaced with LGBT symbols at fifty pedestrian crossings around the Trafalgar Square area in June 2016.

And, what about dressing for work?

The TUC is investigating gender-related problems associated with workplace dress codes and personal protective equipment (PPE). The probe follows reports of sexism related to work clothing, including stipulations to wear high heels, and the provision of ill-fitting PPE for women.

A survey by the union Prospect found just 29 per cent of women said their protective clothing was designed for females. The TUC wants to hear of examples of bad practice, but is also keen to hear examples of good agreements and policies on dress code.

And as for the USA, President Donald Trump has just announced that transgender people cannot serve in “any capacity” in the military.

For my generation and that of my parents, it is a “very mixed up, muddled up, shook up” world indeed as the country appears to being subjected to minority influenced, politically correct socio re-engineering to accommodate less than 1% of the population. Goodness knows at what cost.

The world of financial services industry is already fraught with confusions, challenges and conundrums. How will it keep pace?

“Doo doo doo doo doo doo doo doo doo…………….”

Holly Woodlawn, our story image, was the inspiration for Lou Reeds song. She passed away on December 6, 2015 at the age of 69.

Brexit conspiracy theory, they thought it was all over. It is now.

Panacea comment for advisers and Paraplanners

13 Jun 2017

Brexit conspiracy theory, they thought it was all over. It is now.

Winston Churchill said, “The best argument against democracy is a five-minute conversation with the average voter.”

I have been reading a very interesting book by Sunday Times journalist Michael Hume called ‘Revolting. It is a tome exploring in some detail how the establishment elites are or might be seen to be undermining democracy.

Now I am not a big fan of conspiracy theories but I had a bit of a “Damascene conversion” today and I will share my thoughts with you.

Brexit is the new ‘Gunpowder, Treason and Plot’. It is Cavaliers and Roundheads. It is Braveheart. It has divided the nation and it is about to get worse. In fact so much so that it may end in civil unrest with the electorate ‘revolting’.

Here goes my very simple conspiracy theory.

The referendum produced a result that the establishment neither expected nor wanted. A bit like the Trump Presidency or even the resurgence of the Labour party in the last weeks of the election, depending on your political leanings of course.

When the Brexit result was declared, instead of triggering Brexit the very next day as he said he would, David Cameron resigned, buying the elites some time.

And with that the establishment wheels started to turn to ensure that the right outcome of that referendum would eventually prevail. Behind closed doors those elites that control so called democratic UK set in train a series of actions to ensure that outcome prevailed.

It would take a year or two but….hey ho, wheels with a precise function move slowly.

Establishment wheel 1: The conservative party needed a new leader. Strangely, after some very convoluted, overt Machiavellian machinations, Boris was sidelined (knifed) by Michael Gove, Theresa May won the contest on 11 July 2016, after the constructive withdrawal of the only other candidate, Andrea Leadsom, left her as the sole candidate without any vote needing to take place.

This ensured that a PM was in place who was a remain voter. She did not trigger the Brexit process either, feeling it best for the nation that a delay happened giving those elites time to start making some carefully calculated mischief. And that is what they did.

Court cases, more court cases, EU threats were all the hazards being put in the way to try and get some momentum to make the country think again, vote again- like Ireland (until they got the vote the establishment elites and the EU wanted).

None of this worked and in order to ensure that some clear blue water was put in view to keep the Brexiteers happy, on the 29th May 2017, Theresa May formally wrote to Donald Tusk announcing the intention of the UK to leave the EU.

Establishment wheel 2; The Brexiteers were now happy but there appeared to be no strategy declared to deal with the negotiations. Many said this was because there was no strategy.

That could be because the end game here is that Brexit as wished for by the majority Brexiteers was never going to be allowed to happen. To ensure that outcome a very cunning plan indeed needed to be put in place.

It would cost politically but that did not matter. It is/ was about country, about the elites who control UKplc and certainly not about the people or indeed politicians.

Establishment wheel 3: Theresa May, in thrall, possibly hock to the Remain elites had to take some desperate measures. She claimed that an election was needed to boost her majority to ensure the ‘right outcome’ for UK plc prevailed, giving her negotiating strength in Brussels.

The right outcome for the Brexiteers was so called ‘hard Brexit’. The right outcome for the elites was a soft Brexit or perhaps no Brexit at all.

Establishment wheel 4: The problem with boosting the majority was that this was the very last thing the elites needed. The polls were suggesting a triple digit majority that surely would see ‘hard Brexit’ the result.

But the elites cunning plan was on track, instead of setting the election date to fit with the local elections- the most obvious option for a so called ‘snap’ election, the date was rolled back several weeks to allow campaigning to take place.

Something that would definitely muddy those clear blue waters.

Establishment wheel 5: With waters muddied, Tiny Tim went to work on the Brexiteers, to little effect. The Conservative lead was still looking impressive and Brexit on track. Manifesto time for the elites was the ‘nuclear’ option’ and the button was pushed.

Establishment wheel 6: The so-called leaked Labour manifesto started the wobble the élites needed, more state spending on the NHS, infrastructure, free university education, nationalising the railways and utilities but it was still not enough. What was needed to ensure true chaos and a Brexit sanity sabotage was something almost unthinkable.

Establishment wheel 7: With a Conservative majority still looking at upper two figures the final act was played out. The core Conservative vote is the old. They actually go out and vote.

They have worked hard for a lifetime, paid into the system, gone through wars, plague, famine, pestilence, recessions and even a number of Labour governments are still live in their thoughts. All those strikes, union power, three-day working weeks. They would never vote for Corbin.

Establishment wheel 8: How do you stop that mindset? Simples. You produce your manifesto last and in it you lay the ground to take away all your entire core vote that as a party have strived to retain.

To add a bit of toxicity to ensure more Labour votes you propose to end the fox-hunting ban, refuse to rule out tax increases and bring back Grammar schools.

The result? Job done, electoral chaos, a country fed up with elections, a Prime Minister who has no power without DUP support and what’s more cannot resign without risking yet another election that Corbin might actually win.

Not quite the ‘Up yours Delors’ result for the Brexiteers anymore.

Michael Gove was on record as saying “I think there’s a grassroots feeling of being betrayed by the elites in some way: that the system is working for itself and not for the people at the bottom”.

He was right, but it has escalated further up the system now.

Just a thought, after all, what do I know?

Politicians and Pyrrhic victories

Panacea Comment for Financial Advisers and Paraplanners

12 Jun 2017

Politicians and Pyrrhic victories

As the dust settles on the political mess that surrounds us, I, like you no doubt, have been reflecting on what ‘learnings’ (that wonderful word that those who should be responsible trot out when they have messed up) have been coming out, a little before Thursday and now in the swirling dust cloud of verbal spin, catch phrases, excuses, retributions, pollsters and egos.

My own MP, a junior minister at the Ministry of Justice, visited me last week and expressed his concern that the Tory party had gone ‘off piste’ into danger.

In skiing parlance this was because the small group of skiers had no guide, had not listened to a weather forecast and had no piste map with them or even an avalanche safety device.

I tend not to be too political. This is because I have met a few MPs over the years, some on the TSC, some who were not. I have been amazed at their arrogance, general stupidity and lack of any knowledge of real life.

The nation today should be, in Hector Sants speak, ‘very afraid’.

Why?

Because it now comes to light that the government, since Brexit, has in effect been run by two unelected individuals. They have excluded many senior ministers and MPs from the formulation of policy, a campaign strategy and manifesto.

That is bad enough.

What is worse is what we find out now.

Not only do we have an idiot as PM, we have a bunch of spineless ministers who sat there and said absolutely nothing. Not even a whimper of discontent, in effect offering up a ‘Nurnberg defence (we were only acting on orders) in fear of their jobs in the next government that was expected to have a hundred plus majority.

And even worse, the post election complete lack of contrition. Today from Michael Fallon on the Andrew Marr Show, making possibly the best Uriah Heep impersonation I have ever see by a politician.

Readers of Charles Dickens will know that the character is notable for his cloying humility, obsequiousness, and insincerity, making frequent references to his own “‘umbleness”.

And this lot want to form a government to see the nation through the Brexit process?

Once again I am reminded of Bob Monkhouse’s quote about his career aspirations. He said, “everybody laughed when I said I wanted to be a comedian. They’re not laughing now”.

In this case think of Mrs May. Nobody laughed when she called an election that was not needed. Well, they’re all laughing now.

God save the Queen.

We’ve got to start thinking beyond our guns- those days are closing’ fast

We’ve got to start thinking beyond our guns- those days are closing’ fast

When contemplating the future of the financial advice industry, I can’t help but be reminded of the late sixties movie The Wild Bunch. Set in 1913 Texas, the film follows an ageing gang of outlaws looking for one final score as the traditional American West disappears around them.

Substitute the slow motion, multi-angle view of the world in 1913 to that of 2017, where our industry practices are on the cusp of potentially drastic change that could create uncertain future. Virtual reality now prevails, technology is king and in our world the day of the robo- adviser is nigh. But while I wouldn’t want to compare today’s hard working advisers to the dramatic personalities of The Wild Bunch, there’s an undeniable parallel between these characters facing retirement and some troubling figures around the future of the financial advice sector.

 

The current age demographic of the industry, based on our community analysis above of some 18,000 is certainly veering toward the older generation. New entrants to the industry as at Q4 2016 were lower that Q4 2015*. To make matters worse the number of advisers de-authorising in the same periods exceeded those joining*.

It may not come as a surprise that the number of financial advice firms currently being set up in the UK is also falling, with just 334 businesses authorized by the FCA in 2016 according to an FCA Freedom of Information request. It’s not hard to see a link between these dwindling numbers and the lack of fresh business ideas that is often brought about by bringing young talent into an industry.

Barriers to new entrants can be many and varied. Cost is a primary factor, especially for those looking to start a new business. From June this year the new minimum capital resources requirement of £20,000 comes into force.

For most smaller, established, firms it will be based upon the greater of £20,000 or 5% of the previous years’ income. This is in effect dead money and based on the £20,000 minimum, new firms would need to have a minimum year one potential turnover approaching £400k to warrant the lock up of this money.

Fees for a new firm add up quickly, freeze the £20k then add in staff costs, office costs, professional fees, technology, marketing. Possibly followed by an FSCS call. And then comes the need to find a paying client.

If you are moving from an established firm it is highly likely that there will be contractual restrictions placed upon you regarding client ownership and possibly a geographical restriction along with a time based one.

Put bluntly, all of this means that those seeking to create a new business are betrayed by the sheer cost imposed upon the entrepreneur, the ambitious, the wealth builders of the future by regulation. Rather like The Wild Bunch gang, our industry could well be on the precipice of extinction altogether. Is it any wonder then that we’re struggling to attract younger generations to the financial advice sector?

* Statistics based on Equifax Touchstone analysis of our database and CF30 FCA data