Round Up Autumn 2018

7 threesixty hot topics It’s coming up to a year since MiFID II was introduced, but there are still loose ends for some. We receive many of the same queries. For example, the process for confirming annual suitability and when this is required, together with costs and charges disclosure. On our website you can find frequently asked questions and examples of how you can deal with such challenges. See the MiFID II section w ithin ‘Regulatory developments’. It’s also accessible from the home page. MiFID II Are you charging your clients on an indefinite basis for regular premium investment business? If so, stop! The FCA states a ‘firm must agree with, and disclose to a retail client, the total adviser charge payable to it, or any of its associates by a retail client’. The key word to note here is ‘total’. Unfortunately we’re still seeing firms getting this wrong. A client can’t be charged a percentage of their monthly investment amount on an indefinite basis, as the total initial charge is clearly not known. They can however pay the initial adviser charge in instalments, as long as there’s an end date. If the term is longer than 12 months there are further implications, please talk to us if this applies to you. Deviating from your standard charging structure? How much flexibility do you give your advisers regarding the firm’s charges ? Commercially, if a firm allows their advisers to negotiate their price for their clients, the service they provide often outweighs the price they charge. More often than not, it’s because their advisers aren’t confident in the value they offer. This training need can impact on a firm’s service quality and profitability. If a client is to be charged differently to what has been disclosed in your client agreement (or similar document), you must tell the client if the charge varies materially from what was disclosed initially. You should also make a record of the reasons for the difference. The FCA doesn’t define ‘materially’, nor does it state where to make a record of the instances and reasons. We recommend, as well as confirming the reason in the suitability report, you keep a central record, either within your back office system or in a simple spreadsheet. By doing this, you keep all the information in one place and make it easy to identify any trends across your advisers. In addition, the CF10 at the firm could consider pre-approval / sign off where charges are to be reduced. Advising on transfers from Section 32 buyout plans When it comes to transferring benefits from a Section 32, be aware they often include safeguarded benefits. If so, pension transfer permissions, either full or limited, may be required. In some cases the safeguarded benefits may be restricted to guaranteed annuity rates (GARs). If so, only limited permissions are required. Where other safeguarded benefits, such as GMPs are included, full pension transfer permission and sign off by a pension transfer specialist will be required. It’s also possible a Section 32 contains no safeguarded benefits, and additional permissions are required. This is the case for many individual pension schemes. Some benefits such as scheme specific protected tax-free lump sums, guaranteed lump sums and guaranteed investment returns during accumulation are not classed as safeguarded benefits.