May 8th, 2013
This blog has occasionally raised concerns that the post-RDR advice sector could become increasingly irrelevant in public debates as it retreats to advising Upper Middle Britain.
Is there now a chance it could become irrelevant for something that is much more than a debate but also a public advice challenge – the interest only mortgages shortfalls facing 1.3 million borrowers. It is certainly a significant litmus test.
Of course, the issue can be overblown. While there is not necessarily a need to panic, there is a need for advice. But any consideration of the various options – moving to repayment, creating a savings and investment plan, down-sizing – would be better done with financial advice than without.
However the dynamics of the market may not lend themselves to allowing advisers to do much about it. In a world with more flexible regulations, advisers might set up bespoke workshops to help people consider their options. With more flexible regulations, mutual funds or even structured ..read more
April 26th, 2013
It was a little strange this week that the Government got through its beazer scheme to encourage employees to sign away employment rights in return for CGT free shares in their employers as the Guardian reported.
It looks like the concession which got the plans through Parliament was a promise that the employees concerned would have access to free, independent legal advice.
Not being a lawyer, I still wonder what this legal advice would be. Like this – the law says you can do this. (Well unless there is a constitutional clash with other laws, in which case employees will need to seek the advice of the Supreme Court.)
Surely it should have been financial advice. As in… Well it is quite difficult to put a value on those employment and redundancy rights, but they certainly have some value in protecting your income a little.
This is compared with a shareholding in your firm which does, to an extent, double up your potential liability. ..read more
April 30th, 2013
Hargreaves Lansdown’s boss Ian Gorham gave a presentation to journalists this morning with two fairly big pieces of news (covered here by me) for Mindful Money. The first was an announcement that HL is working on bringing down the minimum investment at which it will offer advice from about £50,000 to £20,000 and the second that Gorham wants a cap put on the charges that insurers can levy on transfers saying 6 per cent of a portfolio is phenomenally high. And so it is.
Both are big news of course especially the reduced minimum which could be a game changer. If HL can make it work maybe others can too. It is certainly the first time I have heard that the advice gap might just have narrowed a little. It seems to be driven by the fact that some people simply won’t self select.
The second issue on transfers is very interesting too. HL may be the biggest consumer platform, but platforms ..read more
May 1st, 2013
When Lord Flight talks about simplified advice he is genuine in trying to find ways to convince more people to save and invest. Some advisers on the comment boards see some sort of pro-bank plot, maybe with the Money Advice Service involved, but I really doubt that. Whether simplified advice would be offered through the banks or even through insurers or platforms or tacked on to an IFA, it is surely a reasonable goal to work towards. We certainly don’t want to see some sort of ‘reprieve’ from the RDR so that banks and insurers can rehire all their old sales forces. In fact, any suggestion that the RDR would allow something called primary advice without ombudsman recourse was dropped years ago. But surely it is possible to devise a very simple suite for those simplified advisers to sell. It would require some disclaimers and possibly something close to a basic approved kitemarked list with FCA approval or at least ..read more
May 3rd, 2013
Ernst & Young is predicting there will be 20,000 advisers by the end of this year down by another 3,000 from the current 23,000. This does not include the bank sales advice retreat. It is only a prediction but it should be in the right ball park.
1.3 million interest-only mortgage borrowers may be facing a shortfall when they come to pay off the capital sum.The average gap may be around £70,000.
Now the interest only mortgage issue isn’t a scandal nor even a crisis yet. But it is a big concern particularly in parts of the North where prices have fallen a lot and property downsizing options are very limited.
All things being equal, one might suggest the best way to deal with this would be to direct as many of these borrowers to proper advisers. Unbiased.co.uk is doing valiant work to do just that. But will there be enough advisers? Twenty thousand advisers – makes about 65 shortfall sufferers for each ..read more
May 22nd, 2013
It was certainly an interesting tack when the Treasury argued against Scottish independence with of all things the compensation scheme and the pension protection fund argument. Actually both hold water to an extent, but they also reveal that disentangling a four hundred year union between two of the most modern and sophisticated economic and political systems in the world isn’t going to be all that easy.
Of course the Treasury is boxing clever on this. It also says Scotland would have to put in a complex system of financial regulation. But as we have asked before, in a smaller market, where it is might arguably be easier to supervise would Scotland adopt such a strong pro-consumerist line or such a hard line on remuneration? A Scottish government would not be anti-consumer. But it might have a different interpretation about where that line is drawn when it comes to encouraging saving particularly if it could keep a closer eye on what was ..read more
May 10th, 2013
A little press release from a lawyer suggests that the FCA paper on interest mortgages could see class actions against lenders and advisers. This is based on the finding that 13 per cent of borrowers say they didn’t understand the terms of the mortgage.
Here is the pertinent quote.
Andy Millmore, a partner at Harbottle & Lewis (www.harbottle.com) says: “What is significant is that this leads to the question of why they did not understand, and whether they were mis-sold, with the strong possibility that many will believe that they were”.
“The problem in the past has been the cost of taking lenders and intermediaries to court. But since last month, solicitors can undertake work on a true contingency basis, sharing in recoveries, which makes the prospect of legal action more likely in my view if groups of borrowers were affected in the same circumstances.”
“This report suggests that interest-only loans could represent a similar issue to payment protection mis-selling, with the potential to ..read more