We’ve recently taken on a couple of young apprentices to join us at Dunstan Thomas, http://www.dthomas.co.uk/imago/news/prApprentice.html. I hope that when the apprenticeships are over they will continue to grow their careers at Dunstan Thomas. The interview process was an interesting experience. We were “given” a handful of young people to interview. It is an honour to be able get to talk to people at the start of their working careers so that it enables you to open up the looking glass on what we also went through as young people. One of our interviewees decided that it was important to turn up to the interview with a face full of piercings. Whilst this shows commendable individualism and an admirable streak of independence, we work in a market that is characterised by conservatism and retrospection in which first impressions are telling. Unfortunately this individual was not selected.
Archive for the ‘Uncategorized’ Category
Sunday, February 26th, 2012
Monday, February 20th, 2012
RDR is clearly a major regulatory event for IFAs, comparable perhaps with depolarisation in December 2004 and polarisation before that in 1988.
Depolarisation essentially offered advisers a choice of staying fully Independent by offering products from the whole of the market; going multi-tied or going Tied to one single provider. In reality most IFAs simply stayed Independent while a small number of major distributors set up ‘mini-ties’ with a small number of providers.
Friday, June 17th, 2011
An industry-wide study that we commissioned in April 2011 found that both IFAs and pensions providers alike predict a strong future for the annuity market despite the imminent abolition of compulsory purchase of annuities aged 75. Over half of the sample of more than 120 IFAs we questioned (52%) think that the value of the annuity market will stay the same as it is today or grow in the future.
Abolition of compulsory annuities proves most popular Pensions Reform according to new IFA survey by Dunstan Thomas
Friday, June 17th, 2011
Dunstan Thomas survey garners views from over 16,000 IFAs as they prepare for RDR and Wrap Platform Asset Migration Boom
IFAs think the abolition of compulsory annuities will benefit the consumer more than any other major Pension Reform being pushed through this year. 39% of IFAs questioned in last month’s online survey considered this the most beneficial reform while 30% selected auto enrolment as the most beneficial reform for consumers. One in five (20%) said that unbundling of charges would deliver the most benefit.
Over two thirds of IFAs (69%) think the new qualification and training requirements demanded of them by RDR, renders provision of independent financial advice to the mass market quite simply unaffordable.
Increasing transparency around charges is broadly welcomed by IFAs – over three quarters of them (77%) backed full unbundling of charges and 62% gave the thumbs up to clear communication of the impact of charges on performance or Reduction in Yield as it is sometimes called.
But understandably IFAs are divided on the merits of banning commission payments – over two thirds (68%) remain against this move; while 72% stated that the FSA’s judgement that selecting only one wrap platform for the transfer of assets of the majority of clients will have a’ negative impact’ for clients.
They also think that the FSA’s tight definitions of Independent and Restricted advice is not the way to go – 72% thought the FSA had got these definitions wrong.
The audience was virtually split down the middle by some of the other disclosure related changes: 44% said that banning of cash rebates from providers to advisers was the right move while 47% said banning of cash rebates from fund managers to platforms (now widely expected by the industry) was a good move.
Three quarters of the sample intend to remain whole of market IFAs after RDR despite the increasing demands being placed on them; while nearly half (43%) think that 16-25% of IFAs will cease trading because of the new demands placed on them by RDR and 20% think 26-40% of IFAs will disappear.
Despite the pressures imposed by RDR the single largest financial pressure being placed on IFAs this year is actually coming from rising levies being exacted by the Financial Services Compensation Scheme to compensate clients for assets lost as a result of an increasing number of investment firms that are failing – 39% put this issue as the largest drain on their coffers in 2011, whereas 24% cited RDR preparations as the most costly area this year. Transitioning from commission to fee-based advice was the largest financial pressure for 22% of firms questioned.
But it is not all gloom and doom so where are IFAs seeing growth this year? Asset Migration onto wrap platforms is seen as the key growth strategy for 16% of firms while 12% see ‘deepening our expertise in a particular area of the market’ as the route to growth. A slightly smaller number (11%) are outsourcing more aspects of what they do to specialists (e.g. Discretionary Fund Managers) to find efficiencies. 10% are acquiring new business by buying other IFA firms as the consolidation trend picks up pace.
The most significant criteria for wrap platform selection was range of funds and fund managers on offer (with a weighting of 77), closely followed by service levels (69) and unbundling of charges capability (45).
In terms of specific functionality ‘Good selection of risk profiling, planning and rebalancing tools’ was voted the most important factor in wrap selection by 30% of respondents. Online transacting capability was the second most important functional requirement (25%); while strong integration with ‘our existing Front Office and desktop systems’ came in third (16%).
Wrap asset migration speed and progress is also worthy of exploration and the figures show some acceleration in asset migration activity:
• 15% have moved 11-20% of customer assets under management onto wraps already.
• 9% have moved 21-30%
• 15% have moved 31-40%
• 10% have completed 41-50%
• A further 10% have completed 51-60%
But if you ask what percentage of assets they expect to have moved at the end of the migration process the figures are much higher:
• Nearly a third (29%) will move more than 70% of assets
• 16% will move 61-70%
• 13% will move 51-60%
The majority of IFAs expect a near tripling of the total Assets Under Management (AUM) on platform within the next 18 months: 37% predicted £300bn of AUM will be on platform by the end of 2012, up from £120bn today. An even higher number (40%) predict a doubling of AUM over the next 18 months to reach £200bn which is significant in itself.
And those assets won’t just be in investment funds and cash, 62% of IFAs think a range of annuities should be offered on platforms and would purchase this way if it was available. Over half of the sample (52%) thinks that the value of the annuity market will stay the same as it is today or grow despite the advent of the abolition of compulsory purchase of annuities at age 75.
Over half of IFAs (51%) said that wrap platforms need to get better at enabling quick and easy re-registration of assets between platforms. Re-registration capabilities are required by the RDR deadline of 31st December 2012 and the technology is already there to deliver it. Considerable industry pressure demanding this capability has led most platforms to prioritise this capability in recent months.
Chris Read, chairman, Dunstan Thomas, commented on the findings:
“This is the most comprehensive snapshot we have ever commissioned into the views of the bulk of the IFA market. It gives us a great insight into a market which is changing fairly rapidly as hundreds of billions of pounds of assets move from legacy policies onto wrap platforms.
“We also see the consolidation trend accelerating, while those looking for growth are deepening expertise and using technology and specialist outsourced service providers to serve customers more efficiently and proactively. Although RDR looks tough for IFAs right now, it is already driving many firms to plan how they can serve more customers better and transform their businesses by so doing.”
Dunstan Thomas commissioned Agility PR to fulfil the above survey of 16,340 IFAs. Agility PR sent questionnaires via an online survey provider and obtained a total of 127 fully completed questionnaires within a two week period between 21st April and 5th May 2011. This equates to a response rate of 0.76%.
Annuity market set to be buoyed by Baby Boomer Retirement Demand, despite abolition of compulsory annuities, finds new Dunstan Thomas survey
Thursday, June 16th, 2011
The major factor impacting the health of the annuity market is the retirement of the ‘Baby Boomer’ generation1 which is now underway, the survey found of more than 400 providers found.2 This perhaps explains why nearly half of providers (42% of the sample) think the annuity market will remain at the same size despite the fact that compulsory annuitisation aged 75 years was scrapped last month. A small group (6% of the sample) even believe the annuity market will now increase in size.
Major step forward in strategy to build growth through focusing on ‘at retirement’ and workplace savings
Thursday, March 31st, 2011
Dunstan Thomas help power AEGON’s platform.
AEGON UK today announces it will enter the platform market later this year, as it accelerates its plans to focus on the ‘at retirement’ and workplace savings markets to drive future growth. This represents a significant investment in the company’s future development and underlines AEGON’s long-term commitment to the UK market.
CP 11/03 – Illustrations –“even though they are clearly a speculation and not a prediction, they can show the potential for variable returns and may help consumers with planning for future needs.”
Thursday, March 10th, 2011
Last month the FSA consultation paper CP 11/03 was released to improve pension scheme disclosure. In effect the consultation looks to ensure firms give consumers enough information about a product’s charges, risks and main features, so as to enable them to make an informed decision.
Thursday, January 20th, 2011
Retirement and investment software provider Dunstan Thomas warned this week that advisers, providers and administrators of Alternatively Secured Pensions (ASPs) will be forced into advisor and administration meltdown by changes demanded by the new Finance Bill which come into effect on 6th April.
Not only will advisers need to inform clients of the changes and their options but administrators will need to update their systems and processes and then start transferring funds of all ASP clients, all in less than three months time, from 6th April onwards.
ASPs will be scrapped at the start of the individual ASP holder’s drawdown pension year in which 6th April 2011 falls. All ASP holders will need to move funds out of their existing arrangement into a capped or flexible drawdown scheme before their next drawdown year, which could be as early as the 7th April 2011. So some ASP administrators will be making these changes simultaneous with the tax year end changes which already generate a glut of activity.
The burden will also fall heavily on advisers who may find themselves caught in the middle -interpreting the options for clients on the one hand and being exposed to administrative chaos on the other. Some may even find themselves using providers that do not want to offer all options straight away post 6th April.
In addition, complexities associated with reviewing clients’ current income limits compared to their new, probably increased, income limits and to then pay the difference, will add to the administrative nightmare, says Dunstan Thomas.
Administration and client communication problems will deepen still further if administrators’ systems, documents and processes have not been updated in time to incorporate these changes. Clients will have the option to go into a capped drawdown or flexible drawdown arrangement, if the provider chooses to provide flexible drawdown from the 6th April.
Flexible drawdown arrangements are further complicated by the need to prove £20,000 annual pension Minimum Income Requirement (MIR) before being allowed to extract more than the 100% of Government Actuary’s Department (GAD) approved figures offered within a capped arrangement.
Natanje Holt, managing director, Dunstan Thomas, explained:“To see the end of ASPs is a positive step for the industry and the Government has listened well and acted quickly. However they have moved far too swiftly for the industry to implement the necessary changes effectively. ASP clients in particular may feel aggrieved when their cases are not handled efficiently. As it is, all parties have less than three months to prepare for multiple changes demanded by the Bill.
“Systems and processes will stretched to the limit with changes associated with Pension Input Periods, the changes around capped drawdown, implementing flexible drawdown and monitoring of MIR documentation.
Denise Gravatt, head of SIPP administration from platform Ascentric added to this: “As we are relatively new to the market we are in the fortunate position of only having a few ASP clients, but I do have sympathy for the larger providers as it will be very difficult for them to process these Finance Bill and tax year end changes simultaneously and then feed all these changes through to their payroll systems in time.”
Dunstan Thomas is already working flat out with many of its clients to ensure compliance when the new Finance Bill goes on the statute book.
It’s all in the title “Establishing the risk a customer is willing and ABLE to take and making a suitable investment selection”
Saturday, January 8th, 2011
In the January 2011 FSA guidance consultation paper, “Assessing suitability”, these are the key aspects:
- Advisers consider attitude to risk but fail to take account of capacity for loss
- 9 out of 11 tools reviewed had weaknesses
- Descriptions of attitude to risk vague.
- Product portfolio/asset allocation does not match risk profile
- Undue focus on risk, insufficient account of other customer needs such as debt repayment
- Failure to understand how the tools work
- Advisers responsible for assessing suitability of tools
- Firms should assess customers capacity for loss
- Identify customers better suited for placing money in cash deposits
- Provide information on the length of time a customer will need to hold an investment
- Indicate the purpose of the investment and the respective risk profile of the customer
- Requirement for different levels of risk for the same customer for their different needs
- Categorising customers in a risk scale is too subjective
- Attitude to risk questionnaires that use questions with percentages to define preferences assume a level of mathematical and financial ability are considered poor
- Attitude to risk questionnaires that assume investment experience are considered poor
- Attitude to risk questionnaires that request the customer to select an option they most agree with are considered poor
- Definitions and descriptions of risk are necessary
- Wide investment categories that capture customers across a broad spectrum of views
- Rely solely on volatility as a proxy for risk
- Need for consideration of inflation, liquidity and risk arising from the lack of diversification
- The need to recognise the importance of diversification (more…)
Wednesday, July 21st, 2010
The pensions industry in the UK is the second largest in the world after the US, with assets totalling over £260bn in personal pensions. Introduced in the early 1990’s the Self Invested Personal Pension (SIPP) market has grown year on year so that there are now over 500,000 plans in force. On going annual growth is predicted at a conservative rate of around 20%.