Adviser trade body lobbies Select Committee over pension freedoms advice

One of the main financial advisers’ trade associations has given evidence to Parliament regarding how the system of delivering pension freedoms guidance and advice to consumers is working.

Much of the submission from the Association of Professional Financial Advisers (APFA) to the Work & Pensions Select Committee concentrates on the costs of regulation firms are facing. This is said to be driving up the fees firms need to charge to their clients at the very time that many people genuinely need advice on their retirement income options.

Guidance for those aged 55 or over is available free of charge via the Pension Wise service, but this can only provide generic information and is unable to recommend specific courses of action, thus falling short of the service a regulated financial adviser can offer. Furthermore, anyone wishing to switch from a defined benefit (final salary) scheme to a defined contribution (money purchase) scheme must consult a regulated adviser. Such a transfer will not be in the best interests of many consumers, but defined benefit pension scheme members cannot take advantage of the freedoms without switching.

Research of APFA members by NMG Consulting shows that 87% of advisers have been contacted by clients wishing to obtain advice on the pension freedoms. The average number of enquiries received by each adviser on the subject was eight. 55% have received enquiries about switching from defined benefit to defined contribution.

The Association’s evidence says that many consumers are attracted to the idea of making partial withdrawals, while leaving the remainder of their pension savings in a drawdown policy, where it can continue growing.

Other issues mentioned by APFA include:

• 40% of advisers have no interest in signing up to the Money Advice Service directory of retirement advisers, either because they have no capacity to take on more clients, or see pension freedoms clients as incompatible with their client base
• There is concern over the liabilities firms could incur by advising a client to switching out of a defined benefit pension, or to give up some form of safeguarded benefit
• It believes that the Financial Conduct Authority and Financial Ombudsman Service should provide a guarantee that there will be no risk of being held liable for client losses when processing transactions for ‘insistent clients’, i.e. those that receive advice but then choose to take a different course of action. It believes that such clients will become more common in the new pensions landscape

Aegon has recently announced that its customers cannot make partial withdrawals from their pension funds unless they have obtained financial advice first.
Chris Hannant, APFA Director General, said:
“Much more needs to be done to help consumers access financial advice. Our research indicates there is an appetite for advice out there, but this isn’t always translating into people receiving advice. We need to lower the cost of regulation to lower the price that clients have to pay.
“We have welcomed the government’s review of the financial advice market because we believe that more needs to be done to enable access to advice. There needs to be a fundamental rethink of the current regulatory environment, particularly around liability. Most barriers to a thriving and varied advice sector come from unfair rules surrounding liability, including: the lack of a ‘longstop’ for advisers and the levy approach of the Financial Services Compensation Scheme which penalises regulated advisers for those unregulated investments which go wrong as well as imposing an unpredictable and seemingly ever-increasing fee burden.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


PBA complaints soar as PPI numbers continue to fall, but large numbers of PPI complaints still unfairly rejected by banks

As payment protection insurance (PPI) has dominated the workload of the Financial Ombudsman Service (FOS) in recent years, it had been assumed that while PPI complaint volumes were falling, so would the overall workload of the FOS.

However, the FOS’s figures for the first six months of 2015 show that PPI complaints fell by 10% when compared with the previous period (to 94,091), yet total complaints rose by 8% to 173,994. The total number of complaints about products other than PPI has risen by 45% when compared to the final six months of 2014.

In the main, this rise can be attributed to a significant increase in complaints about packaged bank accounts (PBAs) being submitted by claims management companies.

The organisations with the most new complaints were Bank of Scotland (20,288), Barclays (20,021), Lloyds Bank (19,818), HSBC (12,792) and NatWest (11,549).

Figures for the ‘banking and credit’ category, which includes PBAs, show that NatWest was the subject of most complaints of this type, with 8,206 new cases. They are followed by Barclays (6,736), Lloyds Bank (5,737), Bank of Scotland (3,935) and HSBC (3,622).

The organisations with the most PPI complaints during the period were Bank of Scotland (15,002), Lloyds Bank (13,319), Barclays (12,111), HSBC (8,474) and Capital One (6,429).

The figures for the cases the FOS closed in the first six months of 2015 show that 57% of cases were decided in the customer’s favour. The very worst firms in this respect are not the largest high street banks, but those with uphold rates of 80% or more include payday lender Cash EuroNet LLC (which trades as QuickQuid) and electronics retailer DSG Retail Limited (which trades as Dixons).
Cash EuroNet has the highest uphold rate in the banking and credit category, while WDFC UK Limited (which trades as Wonga) also had a high uphold rate.

Lloyds Bank was the worst high street giant for wrongly rejecting PPI complaints, with 93% upheld. CT Capital plc, Secure Trust Bank plc and NewDay Ltd all have a 94% uphold rate.

Chief ombudsman Caroline Wayman said:

“Complaints about PPI continue to make up over half of our workload. And though the number of new PPI cases has reduced in the first half of this year, the decline has not been as steady or as marked as generally expected. This is at least in part due to the continued high levels of activity by claims managers in this area.

“Claims managers have also been largely responsible for the substantial increase in complaints about packaged bank accounts, which have driven up our banking workload over this period by two thirds.

“Nobody wants ‘another PPI’. This is why we’re working closely with businesses, claims companies and their regulators, to make sure PPI is sorted as fairly and as quickly as possible for everyone involved – and that lessons are learned to prevent anything like this happening again. If we can all achieve this, then the next seven years should be a different story.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


Debt manager fined by Ofcom over silent calls

Communications regulator Ofcom has fined Glasgow-based debt management firm XS Remarketing Ltd £150,000. The firm, which trades as Debt Masters Direct, made a large number of silent and abandoned calls over 37 separate 24 hour periods between March 9 and April 28 2015. In many cases, the same number was called repeatedly during the same day when the dialling software identified that the call had been picked up by an answering machine.

Silent calls are those where the call continues without anyone from the firm being on the other end of the line. Abandoned calls are those where there is again no one from the firm available to complete the call, so the line goes dead. They can both occur when a firm uses an automated dialling system, however under Ofcom regulations firms using automated dialling are required to have a recorded message that includes a number the customer can phone to request not to receive further communications.

The largest fines imposed to date for making silent and/or abandoned calls are the £750,000 penalties handed to telecommunications provider TalkTalk and insurer Homeserve. The maximum fine Ofcom can impose is £2 million.

Ofcom has had the power for some time (via the Communications Act 2003) to impose these types of fines simply because the calls cause inconvenience to the recipients. The law was then changed earlier this year to bring the Information Commisioner’s Office (ICO) in to line with Ofcom – previously the ICO needed to prove that the calls caused distress or anxiety before taking action. The ICO handles regulation of calls where there is human interaction between the firm and the consumer, and Ofcom handles regulation of automated calls. Both organisations can now impose fines on firms who engage in questionable telemarketing practices.

Ofcom is now conducting a consultation on possible further changes to its ‘persistent misuse policy’.

The executive director of consumer organisation Which?, Richard Lloyd, said of the Debt Masters Direct case:

“Silent and abandoned calls not only waste people’s time but can be distressing, so we welcome Ofcom taking strong action. Hopefully this fine will make other companies think twice before bombarding people with nuisance calls.

“We urge consumers to report nuisance calls and texts to give regulators the vital ammunition they need to crack down on companies that don’t stick to the rules. We also want to see senior executives held personally to account if their firm makes unlawful calls.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


Forbearance being used on a record number of mortgages

Analysis of Bank of England (BoE) data has shown that more mortgage borrowers than ever are being granted forbearance arrangements by their lender.

The study, conducted by accountants Moore Stephens, has shown that some form of formal alternative payment arrangement has been granted to 44% of the mortgages that were in arrears during the first quarter of 2015 – the latest period for which data is currently available. A formal alternative repayment arrangement might include: reduced payments for a period, payment holidays, deferring interest and charges or extending the repayment term.
The highest previous figure was 43%, which was reached in the first quarter of 2012, when the economic climate affected many people’s ability to make repayments. In the first quarter of 2007, the first period for which this data was recorded by the BoE, forbearance was applied to only 29% of mortgages in arrears.

The record level has been reached even though the number of mortgage borrowers in arrears has fallen to its lowest level since the banking crisis. This indicates that lenders are now more willing to allow borrowers in arrears to use forbearance, and suggests that the Financial Conduct Authority (FCA)’s appeals for firms to treat those in arrears more fairly are having a positive effect.

Jeremy Willmont, head of restructuring and insolvency at Moore Stephens, said:

“Banks have come in for a lot of criticism following the credit crunch but the reality is that they are being much more sympathetic to borrowers than in the last recession.

“That is partly because of a change in attitude by banks on how they deal with distressed customers. They are doing a better job of balancing the commercial demands on the bank with their obligation to be responsible lenders.”

However, he also made reference to “still significant numbers of people who are having problems meeting their financial commitments.” The data shows 28,749 borrowers in arrears in the first quarter of 2015.

Mr Wilmont added:

“Lenders are having to be increasingly receptive to homeowners who come forward and discuss payment problems with them at an early stage.

“They are recognising that going straight for repossession as their principal course of action is unsustainable and may not provide the best end result in the long run.”

The FCA expects firms to treat customers fairly at all times, and this includes lenders’ treatment of borrowers in arrears. Alternative repayment plans should be tailored to borrowers’ individual circumstances, and re-possession, court actions and other enforcement actions must only be used as a last resort. Charges imposed for falling into arrears should be no more than the costs incurred by the firm as a result of the arrears.

Examples of good practice cited in the FCA’s 2014 thematic review on mortgage arrears include:

• Having systems in place to identify borrowers who are unable to meet other financial commitments, or who are consolidating other debt, and hence who are at risk of falling behind with mortgage repayments
• Ensuring customers in financial difficulty are referred to free debt advice agencies as soon as possible
• Conducting rigorous assessments of how much individual borrowers can afford to repay once they go into arrears. (Accepting unnecessarily low payments for a certain period could lead to the borrower’s arrears rising significantly)
• Allowing borrowers to make repayments on a day of their choice, rather than waiting for a set date each month as specified by the lender

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


FCA confirms new credit thematic reviews into remuneration systems and arrears management

The FCA has confirmed that it has commenced two new consumer credit thematic reviews, looking at credit firms’ remuneration systems and at the way firms manage customers in arrears.

The remuneration thematic review will be very wide ranging. Not only will firms of all sizes be visited, but the review will encompass debt collectors, as well as firms selling credit products; and will also include firms for whom credit is a secondary activity.

The FCA is known to be concerned where firms have remuneration systems that encourage salespeople to recommend unsuitable products, where staff are threatened with disciplinary action if they do not hit sales targets, or where a large proportion of an individual’s remuneration is made up of bonuses or commission. Instead, the FCA suggests that performance related pay should be based on the compliance standards displayed by the salesperson, or on the quality of their customer service.

The arrears review will be primarily concerned with ‘early arrears’, which refers to the period from when a firm should identify that a borrower is experiencing financial difficulties, to the point where the firm declares the borrower in default. The review will assess firms offering unsecured lending products, including personal loans, credit cards and retail finance.


SIPP adviser fined and banned

The FCA has imposed a ban on holding senior office in financial services, and a fine of £165,900, on financial adviser Robert Shaw, former director of TailorMade Independent Ltd.

The main reason for the action was Mr Shaw’s failure to consider the suitability of the underlying investments when recommending SIPPs. 112 clients invested a total of £112,420,985 in areas such as: green oil, biofuels, farmland and overseas property.

He also failed to disclose to clients that he had a conflict of interest, as he was also a director of TailorMade Alternative Investments, which introduced clients to TailorMade Independent. This disclosure did not take place even though Mr Shaw had been warned about this issue by his compliance consultant.

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