30Nov

Autumn 2017 Budget summary

Chancellor of the Exchequer Philip Hammond MP delivered the Autumn 2017 Budget on November 22.

It has become almost traditional for the Chancellor to leave one of the biggest announcements until the very end, and this speech was no exception. Shortly before sitting down, Mr Hammond announced that stamp duty for first-time buyers had been all but abolished with immediate effect.

First-time buyers purchasing homes valued at less than £300,000 will now pay no stamp duty. Those buying homes valued at between £300,000 and £500,000 will pay no stamp duty on the first £300,000. It all means that 80% of first-time buyers will pay no stamp duty, and that 95% will receive some form of benefit from the latest changes.

The changes do not apply in Scotland, as the setting of stamp duty rates there is the responsibility of the Scottish Government. Responsibility for stamp duty in Wales will also be devolved to the Welsh Assembly from April 2018.

However, the Chancellor was also forced to deliver some bad news when he announced that the growth forecasts for the UK economy had been downgraded. The forecast for the rise in Gross Domestic Product for 2017 was reduced from 2% to 1.5%. Forecast growth in 2018, 2019, 2020 and 2021 has been reduced to 1.4%, 1.3%, 1.5% and 1.6% respectively.

Productivity growth was revised down by an average of 0.7% a year up to 2023.

Whilst employment is at near record high levels, and another 600,000 people are forecast to be in work by 2022, wage inflation is expected to remain limited. The Institute of Fiscal Studies said it was possible that average UK earnings in 2022 could be lower than they were in 2008, which it described as “astonishing”.

Consumer Prices Index (CPI) inflation is expected to peak at around 3% in the final months of 2017, before falling to around 2% over the following 12 months.

The National Living Wage for those aged 25 and over will increase from £7.50 per hour to £7.83 per hour from April 2018, a rise of 4.4%. The National Minimum Wage for those aged 21-24 will rise to £7.38 per hour, while for 18-20 year olds it will be £5.90, for 16 and 17 year olds it will be £4.20, and for apprentices it will be £3.70.

The personal allowance – the amount a person earns before they start paying income tax – will rise from £11,500 to £11,850 from April, but this is merely a rise that reflects the current rate of inflation. The higher-rate income tax threshold will increase to £46,350.

The pensions lifetime allowance will increase, but again only in line with CPI, and will now be £1,030,000 from April next year. The amount that can be contributed each year into a Junior Isa or Child Trust Fund will increase in line with CPI to £4,260, but the annual subscription limit for conventional ISAs will remain at £20,000. Also staying the same is the £5,000 zero tax rate savings income band.

Business rates will rise in line with CPI from next April. Under the current system, rates rise in line with the Retail Prices Index, which is often higher. Business rates revaluations will take place every three years, rather than every five years, as at present, with the change taking effect after the next revaluation, currently due in 2022.

The Chancellor also announced plans to build 300,000 new homes a year, and to create five new ‘garden’ towns.

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.

28Nov

FCA expresses concerns over pension mis-selling

A speaker from the Financial Conduct Authority (FCA) has spoken of his concerns that a new pensions mis-selling scandal may lie ahead. At a seminar organised by the Tax Incentivised Savings Association (Tisa) in London, Brian Corr, the regulator’s head of retail competition, said:

“I don’t think that there is currently a mis-selling scandal as such, but we have identified that there is a potential problem.”

Perhaps the biggest issue in pensions regulation at present is the numbers of consumers seeking to transfer funds from defined benefit (final salary) schemes to defined contribution (money purchase) schemes. They may want to do this for example to allow them to exercise some of the pension freedoms that were introduced in 2015.

According to consultancy firm Xafinity, defined benefit transfers were up 166% in the first quarter of 2017 when compared to the same period in 2016.

The FCA graded the recommendation to transfer out of a defined benefit scheme as ‘unsuitable’ or ‘unclear’ in more than half of the cases it reviewed in a recent exercise. However, the regulator has classed 93.1% of all product recommendations as suitable in its recent reviews, meaning that pension transfers really are an area of concern.

Transfer values may be favourable at present, largely due to plummeting gilt yields, but firms advising in this area must exercise extreme caution. Firms that carry out these transactions must ensure they have rigorous procedures to ensure suitability of advice. All transfer advice must for example be checked by a pension transfer specialist who has the skills and experience to determine whether the advice is suitable, and who holds a specialist pension qualification such as G60 or AF3.

The FCA is once again consulting on the subject of new defined benefit transfer rules, and will publish a report at some stage in 2018. The consultation proposals include a requirement that an assessment of suitability should encompass: the role safeguarded benefits play in providing the level of income a client expects or needs, whether the investments in the receiving scheme meet the client’s risk profile, and the way in which funds will be accessed by the client following any transfer.

It is also proposed that a transfer value analysis should include a comparison showing the value of the benefits being given up.

Even under the existing rules, firms must ensure they carry out a transfer analysis, which carefully considers the likely benefits under the two schemes, the risks of each option and the costs and charges to be paid by the client.

In July 2017, David Samuel Watters, former compliance oversight officer at FGS McClure Watters and its successor firm Lanyon Astor Buller, was fined £75,000 – from his own pocket. This was after serious issues were identified with the pension transfer advice process at the firms.

Mr Corr has personal experience of problems in the pension marketplace, as he was involved in trying to sort out the last pensions mis-selling scandal when he worked at former regulator the Personal Investment Authority some 20 years ago. This was another occasion on which the scandal was sparked by a Government initiative, with up to two million people being incorrectly advised to leave generous occupational pension schemes and make use of personal pensions instead.

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.

28Nov

Citizens Advice expresses concern over card providers granting additional credit to those in difficulty

National advice charity Citizens Advice has expressed its concern over the apparent willingness of credit card providers to increase customers’ credit limits.

Citizens Advice claims that more than six million UK consumers had their credit limit increased in the past 12 months, even though they didn’t ask for this to happen. In total, 8.4 million people had their limit increased in the 12 months to November 2017, amounting to 28% of all credit card holders. However, as many as 77% of these 8.4 million people (equivalent to almost 6.5 million individuals) never actually asked the company to increase their limit.

It adds that 32% of consumers who exhibited signs of being in financial difficulty had their limit increased, and that only 23% of those who felt comfortable with their debt repayments received an increase. This appears to suggest that being in financial difficulty actually makes it more likely that a card provider will raise someone’s credit limit.

The charity also adds that 85% of people believe that card providers should never increase a credit limit without asking the borrower first.

The findings were based on an online survey of 2,033 UK adults by research agency ComRes.

In a press release issued earlier in November, Citizens Advice called on the Chancellor to introduce an outright ban on unsolicited credit limit increases in the Budget. However, no such announcement was made when Philip Hammond MP delivered his speech.

The Financial Conduct Authority has secured some sort of agreement with card providers on this issue, however this is somewhat limited in its scope. Card providers will now ask new customers for their consent before increasing a credit limit, and existing customers will merely be able to choose whether they want their lender to ask for their consent to any increase.

Gillian Guy, Chief Executive of Citizens Advice, said:

“It’s clear that credit card companies are contributing to the rise in consumer debt.

“Rather than credit card holders seeking to take on more debts, lenders are actively pushing it on people without enough consideration as to who can afford to pay and who can’t.

“Few consumers support unsolicited increases and our research shows that they make people’s debt problems worse. The Chancellor must step in to prevent credit card companies weighing people down with unwanted debt – particularly when they are already struggling to keep their heads above water.”

The charity has previously expressed its concern at Bank of England figures that show a 9.8% increase in consumer borrowing in the year to August 2017.

A recent bulletin from the Financial Ombudsman Service highlighted examples of consumers having complaints against credit firms upheld where the firm had failed to carry out sufficient affordability checks, or where they had increased the level of available credit even though they were aware the individual was in financial difficulty.

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.

27Nov

MAS launches Financial Capability Week

The Money Advice Service (MAS) recently held its second Financial Capability Week. Using the hashtag #Talkmoney, it simply encouraged people to talk more widely about financial issues.

The press release from the MAS highlighted a number of indications that UK consumers are unwilling to talk about financial issues, including:

  • 6 in 10 consumers of working age don’t seek assistance when they experience a life event that could have an adverse impact on their financial situation
  • Only 50% of people are aware of the existence of free or low-cost financial support services in the UK
  • Parents and guardians of children are 31% more likely to seek assistance, compared to those with no children
  • 18 million UK adults lack the numeracy skills required to effectively manage their finances

Events that took place during Financial Capability Week included:

  • A #TalkMoney Conference, where speakers included the Minister for Pensions and Financial Inclusion, Guy Opperman MP, and the founder of both the Money Saving Expert consumer website and the Money and Mental Health Policy Institute, Martin Lewis
  • A series of webinars run by The Improvement Service in Scotland to share examples of best practice with organisations delivering various forms of financial support
  • The Tech City ‘Fintech for All’ Awards, rewarding FinTech start-ups for their innovative money management interventions
  • Peer support sessions on money management for carers, delivered by The Friendly Society

David Haigh, Director of Financial Capability at the Money Advice Service said:

“We’re thrilled to see the momentum behind the second Financial Capability Week and the Talk Money Conference. As research clearly shows, the UK is facing a whole raft of challenges when it comes to managing money.

“We all have a responsibility to ensure future generations are armed with the skills and confidence they need to manage their money. It’s great to see organisations across the UK joining in support of this goal and we hope that the events taking place throughout the week will help ensure people across the nation will ultimately become more financially capable.”

Financial Capability Week is part of the wider Financial Capability Strategy, which is aimed at “improving people’s ability to manage money well, both day to day and through significant life events, and their ability to handle periods of financial difficulty.”

The introduction to the Strategy document notes that:

  • 12 million people are not putting aside enough for a comfortable retirement
  • 27 million don’t have a sufficiently large emergency fund to enable them to cope with a financial shock, and 21 million have less than £500 in savings for emergency purposes
  • Only half of families have any life cover at all
  • 19 million don’t have an approach to budgeting that they feel works
  • 8 million are experiencing some form of debt problem, but only one in six of these is receiving assistance with their debts

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.

 

25Nov

CMC censured by ASA for claiming mortgages could be reduced by 70%

Claims management company (CMC) Sanweb (UK), which trades as Ease Your Mortgage, has been ordered to stop broadcasting a radio advertisement that suggested it could be possible for consumers to reduce their mortgage balance by up to 70% by making a claim via the company.

The radio advertisement stated:

“Settlement in your favour could entitle you to write off your current mortgage balance by up to 70 per cent net of fees.”

This claim was based on the idea that borrowers may not be liable for further payments if their lender was guilty of poorly-conducted mortgage securitisations.

Advertising watchdog the Advertising Standards Authority (ASA) acknowledged that in theory it would be possible for a mortgage to be written off on this basis, but that it was unhappy that the company was making this claim before the matter had been tested in a court of law.

Furthermore, were a claimant to be successful on this basis, their entire mortgage would actually be written off. The ASA also believed that the advert was misleading in this respect, as it did not explain that the 70% figure would be the amount the claimant received after the CMC had deducted its fees.

The ASA judgement read:

“The ASA considered that consumers would understand that the advertiser offered a service which made an individual claim against a mortgage lender similar to other claims management companies and that a claim would see their mortgage reduced by up to 70%. We understood from the evidence that it was only theoretically possible that where a mortgage lender had failed to follow the correct procedure when securitising a mortgage, that could result in the balance being written off, and that this had not yet been proven in court. We acknowledged that the ad used words such as “believe”, “may”, “planned court action” and “could”. However, we considered that these words did not make it sufficiently clear that what the advertiser offered was based on a theoretical possibility only and was not a demonstrably successful claim service, i.e. they had not yet successfully written off a consumer’s mortgage balance.

“We noted that the claim the reduction would be “up to 70% net of fees” was based on the premise that if the mortgage had been improperly securitised then the debt would be written off completely and therefore the consumer would have received a maximum of a 70% reduction in their mortgage balance and the rest would cover the fees the advertiser charged. We considered that consumers would not understand what was meant by “up to 70% net of fees” and that it was not sufficiently clear that the reduction of the mortgage was 100% and that the remaining 30% of the outstanding mortgage balance would be owed as a debt in fees owed to the advertiser.

“We considered that the overall impression created by the ad was that for £260 the advertiser could help a consumer reduce their mortgage by up to 70%. However, for the reasons above we understood that this was not the case and therefore concluded that the ad was misleading. We acknowledged that Samweb were willing to make changes to their ads.”

An Ease Your Mortgage spokesman commented:

“We would like to emphasise that the ASA’s only concern was that the way the fees are calculated. We are working with them and are in the process of updating our ad.”

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.

23Nov

MOJ publishes response to consultation on fee restrictions for CMCs

The Claims Management Regulator at the Ministry of Justice (MoJ) has published the results of its consultation into the level of fees that can be charged by claims management companies (CMCs).

Following the consultation, conducted last year, the regulator is pressing ahead with plans to introduce new rules on April 1 2018. These rules will:

  • Prohibit CMCs from charging upfront fees on any financial claim, including all payment protection insurance (PPI) claims
  • Prevent consumers being charged any fees when they do not have a relationship or relevant policy with the lender in question
  • Require CMCs to ensure that all cancellation charges are reasonable
  • Where cancellation charges apply, require companies to provide consumers with an itemised bill setting out precisely what the cancellation charges relate to

The MoJ has decided that it is unable to impose any form of charge cap on CMCs within the current legislative framework. However, the The Financial Guidance and Claims Bill has commenced its passage through Parliament. This Bill will not only transfer regulation of claims management activity to the Financial Conduct Authority (FCA), but will also impose a duty on the FCA to make fee capping rules in relation to financial services claims.

More than half of the 136 responses to the consultation were received from CMCs. Most companies supported a ban on upfront fees, and on banning fees where no relationship with the lender exists, if not on imposing any form of charge cap.

Most of the CMCs that responded said that caps of 15% (including VAT) and £300 for PPI and packaged bank account claims would lead to them leaving the claims management marketplace.

CMCs did however generally support a cap on cancellation fees for contracts cancelled after the 14 day ‘cooling off’ period; and a cap of 25% (including VAT) for all other financial claims.

In its response, the trade association, the Professional Financial Claims Association, confirmed that its members are already prohibited from charging an upfront fee for a PPI claim.

The responses from lenders, insurers, consumer bodies, solicitors’ firms and other organisations generally supported all of the proposed measures, including both bans on fees being charged in certain circumstances, and the imposition of price caps.

In summary, CMCs need to be ready to comply with the new rules on when fees can be charged, and on explaining their cancellation fees, from April next year. They also need to be prepared for some form of price cap to be imposed in the future, along with the generally stricter regulatory environment that will inevitably follow when the FCA takes over as their regulator.

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.

22Nov

FCA COO speaks about expectations regarding firms’ cyber resilience

Nausicaa Delfas, the Chief Operating Officer at the Financial Conduct Authority (FCA) has highlighted the importance of authorised firms having appropriate cyber security measures in place.

Addressing the Cyber Security Summit and Expo 2017, Ms Delfas began by describing cyber-risk as one of the regulator’s top priorities. She listed some of the main risks as:

  • Markets being disrupted through loss of availability of platforms
  • Sensitive market or customer data being stolen or compromised
  • Loss of access to important banking services

She then linked the issue of cybersecurity to two of the FCA’s operational objectives, saying that if firms are resilient to cyberattacks, then it will help to enhance market integrity and to protect consumers.

Ms Delfas then described the issue as being “beyond compliance”, and added that “it should [instead] be business led.” By this, she means that the issue cannot just be left to a firm’s compliance or IT department to sort out, and that directors and senior managers must be involved in the process.

The FCA COO went on to list a number of questions that firms’ boards should be asking, including:

  • Has the firm identified its critical information and most important data assets? Has it taken steps to quantify the value of this information?
  • Does the firm regularly receive updates showing the threat posed to the firm itself and its critical data assets?
  • Has a risk appetite for the cyber risks been agreed?
  • Would the firm be able to detect a significant cyber breach, and does the firm have the capability to launch an effective and timely response?

She summarised by saying:

“No serious company director can afford to ignore cyber security, because it fundamentally impacts the day-to-day activities of almost every individual and organisation. It is vital that organisations protect themselves, their customers and their supply chains.”

In conclusion, Ms Delfas commented that firms needed to “move towards creating a secure culture where people are naturally alert to security issues and act accordingly.” She added that this would require “a change in behaviour rather than simply sending staff on a training programme.”

The number of cyberattacks reported to the FCA by authorised firms rose from just five in 2014 to 90 in 2016. No one can doubt that cyberattacks are a growing threat.

In addition to the issues mentioned in the latest speech, firms need to ensure that:

  • Sensitive data is protected, e.g. through the use of encryption software
  • Critical systems and data are backed up, and that these back-up systems are tested regularly
  • Staff use strong passwords – using combinations of lower and upper case letters, numbers and special keyboard symbols – when logging on to hardware and software
  • Staff are trained to recognise suspicious activity, such as phishing emails
  • Staff with access to important data are security screened
  • There are effective recovery and response procedures in place, in the form of a detailed business continuity plan, which explains what the firm will do in the event of a security breach to ensure business operations can continue
  • Data security measures are tested on a regular basis
  • Significant data breaches are reported to the FCA, as part of firms’ Principle 11 obligations to disclose to the regulators anything of which they would reasonably expect notice

No firm of any size can afford to neglect this issue, as the consequences of an attack could be serious. For example, even the smallest financial advisory firm may hold the records of several thousand clients.

Research by financial software provider Intelliflo shows that 44% of financial advisers have experienced some form of cyberattack, and that 82% of clients would stop doing business with their adviser if they became aware that the firm had been hacked.

Hence, any firm unsure as to what they need to do regarding cyber security is advised to seek professional advice.

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.

20Nov

Insurance AR banned for producing false documentation

The Financial Conduct Authority (FCA) has banned Richard Telfryn Jones from carrying out any activity in financial services, after he was found to have fabricated documents relating to his authorisation as a director of an appointed representative firm.

Mr Jones’ principal firm is not named in the regulator’s Final Notice, and is simply described as Firm D. In March 2016, Firm D applied to the FCA for Mr Jones to perform the CF1 (Director (AR)) controlled function.

In support of the application, Mr Jones provided a letter which appeared to be from Firm B, who acted as principal to his previous AR firm, ORB Commercial Solutions Limited. This letter stated that “all business that was transacted was done so correctly”, but also stated that “there were regulatory issues”.

As might be expected, the FCA queried what these “regulatory issues” were. In response, Mr Jones provided a new letter to Firm D, his new principal firm, which now stated “there were no regulatory issues”. Firm D then informed the FCA that Mr Jones had told them that Firm B had made a typographical error in the original letter.

However, at a later date, Mr Jones admitted that he had fabricated the content of both letters, and that they had not in fact been produced by Firm B. He also acknowledged that he was aware that Firm D was likely to send the letters to the FCA in support of his application.

Mr Jones was also found to have made false and misleading statements to the FCA, having initially told them that both letters had been provided by Firm B.

The FCA has therefore concluded that there are issues with Mr Jones’ honesty, integrity and reputation, and so has taken the ultimate step of banning him from the industry.

An outright ban must be seen as the inevitable consequence of this type of conduct.

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.

18Nov

FCA sets out its ‘approach to consumers’, warning firms to treat vulnerable customers fairly

The Financial Conduct Authority (FCA) has published its ‘Approach to Consumers’ paper. The regulator says that this document “explores our approach to regulating for retail consumers”, explains “what good looks like for all retail consumers”, and sets out “how we will work to diagnose and remedy actual and potential harm.”

In the foreword to the document, FCA chief executive Andrew Bailey comments:

“Markets can only work well if consumers are treated fairly. The financial products and services consumers need should also be available, marketed and sold in a way that allows them to make informed choices.”

The five key outcomes the FCA wants to see are:

  • Consumers can buy the products and services they need because the market in which they are sold is clear, fair and not misleading
  • High-quality, good value products and services that meet consumers’ needs
  • Everyone can access the financial products they need
  • The needs of vulnerable consumers are considered
  • Consumers are appropriately protected from harm

Whilst the paper acknowledges that consumers should take some responsibility for their financial decisions, the FCA warns that how much responsibility they should take depends on the circumstances. Specifically regarding financial advice, it says that “a consumer who has taken regulated advice should be able to rely on it being appropriate.”

The FCA also warns firms to treat vulnerable customers fairly. It notes that “any consumer can become vulnerable at any time in their life”, and that it “[expects] firms to pay attention to possible indicators of vulnerability and have policies in place to deal with consumers who may be at greater risk of harm.”

Later in the document, there is a very stark warning indeed, concerning firms’ treatment of vulnerable customers. The FCA comments that:

“We will take any deliberate exploitation of vulnerable or excluded consumers very seriously. Our response will include using the toughest enforcement action open to us.”

The FCA defines a vulnerable consumer as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”

Customers may be ‘vulnerable’ due to any number of factors, which include:

  • Financial difficulties
  • Lack of experience of financial products and services
  • Learning difficulties
  • Mental or physical health issues
  • English not being their first language
  • Poor spoken and/or written communication skills in general
  • Poor literacy and/or numeracy
  • A major lifestyle change caused by bereavement, divorce or unemployment

In some sectors, the very fact that an individual is doing business with the firm may well be an indicator that they are vulnerable. For example, a consumer is unlikely to be dealing with a debt manager unless they are in financial difficulties.

Aside from the issue of consumer vulnerability, developing trends that the FCA says will affect its approach to consumers include:

  • Increasing numbers of people who are experiencing severe debt problems
  • The ageing population
  • The increased use of technology in delivering financial services
  • The fact that many consumers are not seeking professional financial advice, even when facing important life choices such as considering how to access their retirement savings

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.

16Nov

Advisory firm loses out at FOS over advice to encash bond

Gateshead firm Prism Financial Advice has been ordered to pay compensation by the Financial Ombudsman Service (FOS), after the Ombudsman concluded that the firm did not fully explain the implications of encashing an investment bond. It was apparently not explained to the client that, as a higher rate taxpayer, he would be subject to chargeable gains on the growth in the value of the bond.

Prism said that, on the basis of the information it held on the client, Mr J, it had every reason to believe he was a basic rate taxpayer. According to the firm, Mr J failed to respond to his adviser’s efforts to contact him in January 2016, shortly before he tabled his complaint. The suggestion here is that, had contact been made at this time, the firm may have been able to fully understand his updated tax position.

Prism accepted that it had been guilty of “communication failures”, and offered Mr J £500 in compensation, in addition to offering to reduce the initial advice fee for the bond from 3% to 1%.

However, it contested the main elements of the complaint, saying that the client only fell into the higher-rate tax band as he chose to work additional overtime, and that as a firm, it could not reasonably have been expected to know that he would become a higher-rate taxpayer.

However, after a final decision by ombudsman Tony Moss, the firm must now pay Mr J £3,889, in addition to the £500 it has already offered. The £3,889 figure is made up of the amount of the revised 1% advice fee, plus the tax liability incurred by Mr J on encashment. Additional compensation based on an interest rate of 8% must also be paid by the firm.

In giving his decision, Mr Moss also questioned whether the client had actually benefitted from being advised to encash his bond and take out a new investment. Mr Moss comments:

“The adviser makes highly generalised references to the existing investments no longer offering the benefits they once did without offering any specific concerns about the bonds in question. Equally, he offers no detailed explanation as to why the proposed new investments would deliver better growth potential etc.

“Crucially, the advisor does not explain why the existing portfolio could not be adjusted to potentially improve performance or provider greater flexibility etc. thereby avoiding encashment chargeable gains and new set-up charges. If Mr J had not been advised to go down this route he would not have incurred either a new set-up charge or a chargeable gain. He would have kept his original bonds and avoided both of these.”

Mr Moss adds that the firm failed to explain the potential tax liabilities in the suitability report that was issued to Mr J when the bond was taken out.

This case highlights several important points for advisory firms to consider:

  • When recommending that clients encash one investment product in order to invest the monies in another product, the transfer must genuinely benefit the client
  • Firms should make every effort to remain in contact with their clients, and to fully understand their changing financial situation
  • Suitability reports should highlight any tax issues associated with the products being recommended

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.

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