This week saw the release of the much-anticipated Financial Advice Market Review (“FAMR”, dubbed farmer) and the budget.
FAMR was an opportunity wasted. It was a restatement of the problems we all know exist – and an elaborate restatement at 85 pages!
On April 21st we will host an informal event, “Chew the Fat over FAMR”. At a London pub, we will have pints, pork scratchings and veggie nibbles – and we can all debate what should have been included in FAMR. Email us at events@platforum.co.uk for details. It is open to anyone interested in discussing the future of advice in an informal setting (attendees need to cover their own bar tab, just like on a real farm…).
Peter Mann, Jeremy Fawcett, Danby Bloch and I will share our views of what a rigorous and comprehensive FAMR ought to have looked like and we will invite several guests to share their views too.
As an industry we are craving clarity on the boundaries for advice and guidance. We had hoped that this review would open opportunities to offer cost effective advice to the mass market (in particular, to those with less than £100k of investable assets).
Yet that did not happen. The committee did little more than kick the can down the road by recommending further consultations.
Meanwhile the product providers and the banks have been given no easy route back in to the market through this review. We don’t think many product providers will use their budgets to build until they have clearer guidelines.
In our Adviser Platform Guide (published today) we report that financial advisers are growing their businesses by hiring more administrative staff. Some are also investing in technology but admin staff came up first in most of our conversations. One firm we spoke with is hiring more advisers – but this came from just one organisation. The others said that hiring quality new advisers is hard and expensive. They are focusing instead on admin staff and paraplanners to increase capacity of existing advisers.
We had hoped FAMR might have included provisions to both boost adviser numbers (think training programmes and recruitment drives) and to foster innovation by offering more certainty around guidance and technology enabled advice (which we didn’t get in the FCA clarifying the boundaries paper in January 2015 either). But we’ll have to wait for another season to harvest such ideas.
A boost for young investors in the budget
“Toward a long-term savings culture” was the theme of our Platforum 2015 annual conference in October. Strikingly, this year’s UK budget included interesting provisions in that direction. One pillar was to encourage the next generation of investors. The Lifetime ISA (LISA) offers a compelling incentive to save while allowing some flexibility to access the money before retirement. The cuts to capital gains taxes were also bold and should give a boost to investing.
However, one can easily take issue with the age cap. Why should this be limited to those under 40? Data supports the case that the age limit is wrongheaded.
Wealth accumulators include those up to 55 years of age. The LISA is clearly aimed at accumulators. Those aged 40 to 55 are unlikely to have a generous DB pension and to have saved enough for retirement.
The average age of D2C investors has fallen to 54 from 57 five years ago (see our latest D2C Market Size and Structure report). But these investors have an average balance of just over £30k. Our report out today on adviser platforms shows that nearly half (49%) of adviser platform customers are aged 55-74 (a further 14% are over age 75).
So it’s not just for younger workers. Everyone needs help saving more for retirement and the LISA should be available to all those accumulating wealth.
Although the budget included meaty proposals, FAMR didn’t satiate. The challenges that it merely restated still exist and still need to be overcome. So please join us on 21st April to “Chew the Fat over FAMR” to discuss the seeds of change that FAMR ought to have planted.