The FCA has announced a thematic review of retirement advice, following at least six months of speculation.
The announcement came in a rather terse press release, which takes 'Suitability II', back of off the shelf it was placed on during Covid.
As a thematic review, it doesn't come with a discussion or consultation paper or at least not yet.
The release specifically mentions the popularity of drawdown since pension freedoms, a little more surprisingly, equity release and finally the consumer duty.
The release also says that some advisers can expect to be visited in early 2023 (so put that in your diaries!)
I have no crystal ball, but I can see a risk that the regulator, which has previously wondered why annuity sales are so low, will be asking advisers the same question and may not like the answer. Anecdotally, advisers are already suggesting most clients, despite higher annuity rates, remain resistant but since the various issues with DB transfers, the regulator does seem pretty obsessed about clients assuring a significant chunk of income. Mixed with the consumer duty's concerns regarding foreseeable harm, I think the advice sector should be a little concerned about where this could go.
Indeed, there seems to be some risk the regulator is seeking an objective truth, when frankly, there isn’t one.
In Pension Age, Quilter offers the view that the review will act as 'bellwether' for consumer duty rules. If this is correct, it is interesting that it is advisers, not providers, that represent a kind of test case. The duty’s first concern certainly in terms of the timetable reads as providers who are, after all, only required to relay their plans regarding the duty to intermediaries by the end of April.
IFA Magazine also presents some expert views including Aegon’s Steve Cameron with this neat summation.
“Retirement advice is central to many adviser businesses and is one of the most complex – as well as valuable – areas of financial planning. Advisers need to help their clients navigate many uncertainties including future and varying income requirements, short and long term investment returns, inflationary trends and of course how long clients might live. In new Consumer Duty terms, this presents many foreseeable harms which advisers will be considering as part of delivering good outcomes. Some such as running out of money too soon, or taking less income than is sustainable, can be in conflict.”
The Telegraph chips into the broader pension debate with this gloomy declaration - ‘British Retirement has peaked’. Not sure about the discussion of cruises in the intro. I know it has a reasonably wealthy readership but for some retirees it will be about heating and eating with others ‘getting by’ rather than finding themselves in a ‘comfortable enough’ group.
It does feel like a significant chunk of people in certain age cohorts, especially those without financial advisers, are going to pay the price for huge policy confusion regarding pensions in the 80s, 90s and 2000s.
Back to the ongoing soap opera-like story at the CII and PFS.
At a consultation meeting last week, the former PFS president Sarah Lord warned advisers off calling in a £20m CII loan as New Model Adviser reports. She is reported saying it would be catastrophic and despite the dispute between the two related bodies would not be in advisers’ interests.
I am struggling a little to understand what exactly ‘calling in’ looks like and, in the current circumstances, how it would happen.
We also learned that the current consultation with PFS members is extended by eight days. By the time you read this review, it will be about five days. I thought this was over one additional director that would deliver a majority of the PFS board generally supporting or appointed by the CII, but as noted in last week’s review, it remains unclear whether the resignation of the until-recently President of the PFS Caroline Stuart delivered that anyway.
As you can see later in this review, the interim PFS CEO is still presenting this as a much broader consultation than just the composition of the board.
Once the consultation closes, a reflection period now extends to February 3rd. (Advisers can, no doubt, supply their own ‘long hard look in the mirror’ punchlines.)
In Money Marketing, we also have the CII chief executive Alan Vallance’s remarks at a seminar reported at length.
To quote Money Marketing, it says that Vallance, in his opening remarks, denied speculation that the CII’s takeover over of the PFS board is an attempt to seize the PFS’s reserves.
The key passage in the story justifying this appears to be as follows –
“I’m a chartered accountant by qualification, so it probably wouldn’t surprise you that the first thing I did was to have a good look at the financial position of the group.”
Vallance explained that the CII Group had to “weather the financial storm” created by the Covid-19 pandemic, while investing in a new IT system and buying out the group pension fund.
“The CII deliberately used the group’s central reserves not the PFS’s reserves or any other company’s reserves to do so,” he said.
Vallance also stressed that the PFS’s reserves have only been invested and used for the PFS. He said the PFS continues to be mandated to focus entirely on protecting and serving the interests of the PFS.
Perhaps it is a little unfair to do such a detailed textual analysis of what is a difficult story to report on, but I would be minded to quote big chunks of text maybe in a separate box, so that every assertion and passage of indirect speech from the CII CEO is absolutely underpinned and demonstrated in direct quotes.
Of course, there are uses of money by the CII, which, while not getting anywhere near the description of ‘seizing’ may very well be viewed by financial advisers as sub-optimal.
Money Marketing also reports Vallance, again in indirect speech, as ‘guaranteeing that the PFS will not be deregistered'. Again, I would like to see the full direct quote or the question that led to such an answer all quoted directly.
Anyway, enough textual analysis.
Whatever else, these feel like very significant assertions whether one is minded to agree, or is in a more sceptical camp.
It is worthy of note that, whatever else, Vallance’s prepared remarks at the seminar provoked an adverse reaction from PFS member director Gordon Walker who said he felt ambushed.
In another story, FtAdviser quotes the PFS interim CEO Don MacIntyre at length. (The nice chunky quotes are bit more to this reviewer’s liking.)
MacIntyre said: "It has been vital for me and the PFS board to ensure members’ voices are heard. I know from the almost two thousand members that have written to me that there are significant concerns about what this action by the CII will mean for their organisation, many of which I share.
"The deadline for the consultation has been extended to 27th January to enable more members to be heard. I continue to urge all PFS members to make their views, insights and concerns clear to me via the survey. The more members I hear from, the stronger the message I can relay for the PFS to the PFS and CII boards on your behalf."
I don’t see either the CII or PFS presidents discussing an Emergency General Meeting and certainly not from this coverage above, despite McInItrye mentioning lots of members being in touch with him in more general terms. We shall see whether a PFS EMG proves to be a sub-plot or part of the main storyline in the next few weeks.
However former PFS president Robert Reid is clearly sceptical in this Money Marketing story.
He says: “If we’re going to have an EGM, we have got to have complete clarity and know what that resolution is about. What do you want to happen next?
“There’s a wish for an EGM but I’m not sure they understand what their strategy is. What are they exactly calling for?
“Are these things attainable at all? There’s no point putting together a wish list if nothing in this wish list is possible. You have to be pragmatic."
Frankly, this story seems to fly in a hundred different directions across the different trade websites and to be crying out for another in-depth analysis of the events since mid-December. (There have been several prior to December).
I am still struggling to understand why an enterprising young journalist hasn’t contacted the three new PFS board members to confirm what their position is regarding the finances, any views on the previous episodes in the dispute, their view on deregistering of the PFS or not, an EGM and indeed the future direction for the PFS as part of the CII.
If they are unable to talk, it is still surely of significance. Without knowledge of their views or at least knowledge of why they cannot give their views, then PFS members may be struggling to understand exactly what it is they are being consulted about this week, regardless of what CII and PFS CEOs, former Presidents and current member directors say.
There is a lot of talk of monies this week in terms of what Vallance said regarding CII funds, and his reported assurance that PFS reserves are being invested and used for the PFS. Given that money is such a large part of the debate, does it make sense to ask both boards where the money is coming for various legal and public relations advice regarding this issue? Again, these services do not, in my experience, come cheap especially when it involves a heated dispute.