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Welcome to our monthly newsletter, Regulation Round Up. Once a month Hannah Keane covers some of the main stories to come out of HMRC and the FCA, as well as anything else related to rules and regulation in financial services.

FCA to Launch Pure Protection Market Study

Last month, the FCA announced that they are planning to launch a study later in 2024/25 into how pure protection insurance products are sold.

The FCA stated that this comes after some concerns that competition is not working well in the market. In particular, they have concerns about commission arrangements and how these might prevent good outcomes being delivered to clients, as well as concerns about some products providing poor value (for example, if the total premiums paid over the lifetime of the product exceed the maximum payout).

The study will focus on term assurance, critical illness cover, income protection insurance and whole of life insurance.

Read more here:

FCA announces work into pure protection market

FCA Call for Input – Review of FCA Requirements

The FCA have launched a Call for Input which asks for opinions on refining their retail conduct rules, with a view to simplifying their guidance. They stated that they want to “address potential areas of complexity, duplication, confusion, or over-prescription, which create regulatory costs with limited or no consumer benefit.”

If you’re interested in taking part, responses need to be sent to the FCA by 31st October 2024.

Read more here:

Review of FCA requirements following the introduction of the Consumer Duty | FCA

Pensions Review Terms of Reference published

The Chancellor has launched a landmark pensions review, and The Terms of Reference for Phase One of this review were published in the middle of August.

The pensions review aims “to boost investment, increase saver returns and tackle waste in the pensions system.” It will be led by the Minster for Pensions and will focus on defined contribution workplace schemes and the Local Government Pension Scheme.

The first phase of the review is focussed on investment. In particular, it will focus on four areas:

• Scaling and consolidating defined contribution workplace schemes;

• Tackling inefficiency in the Local Government Pension Scheme;

• The “pensions ecosystem” and how we can achieve a greater focus on value, rather than cost, to deliver better outcomes;

• Encouraging  pension investment into UK assets to boost growth.

Initial findings from the first stage of this review will be reported later this year, ahead of the introduction of the Pension Schemes Bill. The second phase of the review will begin later this year and will consider further steps to improve pension outcomes, including assessing retirement adequacy.

Read more here:

Pensions Review – Terms of Reference: Phase One

Plans to Scrap ‘British ISA’

According to the Financial Times, “two people close to the process” told FT that Labour has scrapped the idea of the British ISA, which would have allowed an extra £5,000 for UK-listed equities only, on top of the existing £20,000 yearly allowance.

The Treasury have said that no final decision has been made. At the moment, plans for the British ISA haven’t been officially  scrapped, so only time will tell.

Read more here:

https://www.ft.com/content/64cd3caf-c36a-4e51-8e19-d430f3324d77

Payment Services Regulator Reduces Compensation Limits

The Payment Services Regulator is introducing new protections for victims of APP (authorised push payment) scams, while incentivising the industry to implement enhanced fraud prevention tools. The rules are due to come into effect on 7th October 2024.

Initially, the PSR stated that these rules would require banks to reimburse their clients up to £415,000 if they lost money due to an APP scam. After looking into this further, the PSR is consulting on reducing this to £85,000, in line with the FSCS limit.

Read more here:

PSR confirms implementation date for APP scam protections as 7 October, and publishes high value APP scams review and consultation

That concludes this month’s Regulation Round Up. As always, we encourage you to stay informed and keep an eye on upcoming consultations, reviews, and regulatory changes that may impact your business and clients. With several important developments on the horizon, such as the FCA’s ongoing reviews and the upcoming pensions and payment services changes, it’s crucial to remain proactive and engaged. We’ll be back next month with more updates and insights on the latest in financial regulation. Stay tuned!

In this week’s Investments Matter, Paul Kenworthy covers essential updates for financial planners, including the latest changes to Prudential’s PruFund range, an exciting industry event focused on sustainable investing, and what to expect from the upcoming UK Autumn Budget. These developments could have a significant impact on your clients’ portfolios, making it crucial to stay informed and prepared.

PruFund Updates

Prudential have released their latest quarterly Expected Growth Rate (EGR) and Unit Price Adjustment figures for their PruFund range.

As part of the smoothing process, Prudential set EGRs. These are the annualised rates that an investment would normally change in line with. The EGRs reflect Prudential’s view of how they think each PruFund fund will perform over the long term (up to 15 years).

Although Prudential use a long-term view of performance to set EGRs, they also have to take into account shorter term performance. On a daily basis, if the shorter-term performance differs too much from the current EGR, Prudential would have to amend the value of the fund up or down to ensure they are not returning too much or too little. These are the UPAs.

In this recent announcement, Prudential have confirmed that the EGRs have decreased by 0.30% for the following funds: PruFund Risk Managed 4 & 5 and PruFund Planet 4 & 5, whereas the EGRs have decreased by 0.40% for the following funds: PruFund Growth, PruFund Cautious, PruFund Risk Managed 1, 2 & 3 and PruFund Planet 1, 2 & 3.

An upward UPA of 2.19% has been applied toe the PruFund Cautious and Protected Cautious (Dollar) funds for the following plans, International Prudence Bond and International Investment Bond.

Goodstock Conference

On 19th September 2024, NextGen Planners will be presenting the Goodstock Conference at Dynamic Earth in Edinburgh.

NextGen have called this event ‘The first-of-its-kind Conference for Financial Planners who are passionate about investing for good.’

However, this is not just a sustainability conference, it is a long term project to change the way that financial planning conferences are held in the UK.

All proceeds from this event will to towards Lauriston Farm, which is an urban farm in North West Edinburgh which grows food for people and Wildlife.

Myself and Amy North will be attending the Goodstock Conference and we will be providing our insights in the days following the event.

The agenda and speakers have been announced, and it sounds like it will be a very exciting and informative event.

If anyone reading this is attending and would like to catch up with us, either contact one of us in advance, or just come and say hello to us on the day.

UK Autumn Budget

The new Prime Minister Sir Keir Starmer has stated that the Autumn Budget (due to be delivered on October 30th) is going to be ‘painful’. He stated that “we have no other choice given the situation that we are in”, clearly laying the blame entirely on the previous Government.

The Prime Minister and Chancellor have both committed to the previous pledges to not increase National Insurance, Income Tax and VAT, along with protecting the State Pension Triple Lock.

This has lead to much speculation that some of the areas of focus in this Budget will be Inheritance Tax (IHT) and Capital Gains Tax (CGT). This could come in the form of increased levels of taxation, or in the reduction of the allowances / exemptions.

The CGT annual exemption has been reduced significantly over the last few years, from £12,000 on 2022/23 to £6,000 in 2023/24 to the current amount of £3,000.

The amount of IHT that was collected in the 2023/24 financial year was a record £7.5bn, with it being expected to reach around £10bn by the end of the decade.

The Office for Budget Responsibility has estimated that a total of £15.2bn will be raised in CGT in the current tax year. This represents 1.3% of all receipt and is equivalent to £530 per household and 0.50% of national income.

Source:

Capital gains tax Office Of Budget Responsibility

We will be keeping a very close eye on the announcements made in the Autumn Budget, as it will likely affect a large number of investors. The potential changes to Inheritance Tax and Capital Gains Tax, in particular, could have significant implications for the financial planning strategies you offer to your clients. As financial planners, it’s crucial to stay informed about these developments so that you can provide timely and accurate advice that aligns with your clients’ best interests.

At We Complement, we understand the challenges that financial planners face in adapting to an ever-changing fiscal landscape. Our service is designed to support you in delivering the best possible service to your clients by offering resources, insights, and tools that complement your existing expertise.

If you’re looking to deepen your knowledge, streamline your practice, or simply stay ahead of the curve, We Complement is here to help. Connect with us today to explore how our solutions can enhance your service offering and keep you prepared for the changes ahead.

Empowering Financial Advisers with Clear Insights and Tailored Investment Strategies

Hello and welcome to the August edition of We Complement’s Specialised Investments Simplified newsletter, thoughtfully written by our very own Lucy Wylde.

At We Complement, we understand the important role you play in guiding your clients through often complex investments. We’re here to make that journey a little easier for you, offering clear, practical insights that you can share with confidence. Whether it’s helping your clients navigate inheritance tax, uncovering opportunities in AIM portfolios, or exploring the exciting potential of Venture Capital Trusts, our goal is to arm you with the knowledge and tools to better serve your clients and support them in reaching their financial goals.

Continuing the trend for the 2024/25 tax year, Inheritance Tax (IHT) continues to raise a significant level of revenue for the government. Data published by HM Revenue and Customs (HMRC) on the 19th of July 2024 show that between April and June of this tax year, inheritance tax receipts hit £2.1 billion. This figure is £83 million higher than the same period last tax year.

Although omitted from Labour’s manifesto, it does feel like Inheritance Tax would be an obvious target for the new Chancellor to raise the £22 billion required to cover unfunded pledges inherited from the previous government.

However, while there have long been calls for reform to the system, it now seems increasingly unlikely that any major overhaul will happen. Of the changes that may be made, it appears unlikely that they will benefit ‘the many.’

In particular, there have been reports that the new government may abolish the current reliefs for farms and businesses, which enable either 100% or 50% of certain businesses and business assets to qualify for IHT exemptions under Business Relief. This would also impact investors with qualifying AIM-listed shares, which, after two years of ownership, also qualify for 100% IHT exemption.

Of course, this is all speculation at present, as the new government’s actual plans will not be revealed in full until Labour’s first Budget on Wednesday, the 30th of October.

With the above in mind, we have taken a look back at the Q2 2024 performance of the Rathbones I W & I AIM Portfolio IHT Plan and look forward to the launch of the Foresight Technology Venture Capital Trust (VCT) PLC.

Rathbones I W & I AIM Portfolio IHT Plan

Having recently become part of the Rathbones Group Plc, Investec Wealth & Investment (UK) now manages over £1 billion in assets, including those under Rathbones.

Individually, as of the end of June 2024, Investec Wealth & Investment (UK) managed just under £750 million of assets for clients purely in AIM IHT accounts.

According to the Q2 2024 performance update published on the 1st of August 2024, the Rathbones I W & I AIM Portfolio IHT Plan net 12-month return (on a rolling quarter-by-quarter basis) is 5.1% over the last 10 years.

In terms of the estimated revenue split for the portfolio, as of the 30th of June 2024, the UK has a 44% revenue exposure. This was reduced from approximately 50% as more global companies were introduced into the portfolio. While revenue in the UK has decreased, there are 10 companies within the Rathbones I W & I AIM Portfolio IHT Plan where over 80% of revenues are derived domestically.

From a market capitalization point of view, nearly 50% of the companies in the portfolio have a market cap above £500 million, with the average weighted market cap at £516 million. This aligns with Investec Wealth & Investment (UK)’s investment philosophy of quality, where many companies that meet their investment criteria are well-established and have grown into sizable companies.

The dividend yield at the end of the second quarter of 2024 was 1.7%.

Turning to performance, it was another strong quarter. Quarter 2 of 2024 closed with the cumulative performance of the portfolio up by 4.6%, compared to both the FTSE AIM All-Share Index at 3.5% and the FTSE All-Share Index at 3.7%. This continues the trend of the Rathbones I W & I AIM Portfolio IHT Plan outperforming the FTSE AIM All-Share Index over the past 1, 3, 5, and 10-year periods.

In connection with the above, the top three contributing companies during Q2 2024 were Keywords Studios PLC, followed by Alpha Financial Markets Consulting PLC and Lok’nStore Group PLC.

The panel and market research business, YouGov, was the worst performer, costing the portfolio 0.230 basis points (bps) of performance in the second quarter of 2024, due to an overweight asset allocation compared to the index.

Foresight Technology VCT PLC

Over the past three years, total fundraising into Venture Capital Trusts has exceeded £3 billion.

Managed by Foresight Group LLP, the Foresight Technology VCT PLC is the only VCT with a focus on deep technology.

Deep technology refers specifically to companies that solve significant, high-value problems through scientific or engineering breakthroughs. This is a sector that has consistently delivered strong returns, with these types of companies making up 25% of all so-called unicorn exits (startup companies with values exceeding $1 billion USD) within the last year.

Foresight Technology VCT PLC consists of one share class, the FWT Share class, which intends to invest principally in early-stage UK technology companies.

After originally raising £37.8 million through an Ordinary Share issue in 2010/2011 and 2011/2012, the Foresight Technology VCT PLC subsequently issued the “C” shares fund of £13.1 million and a “D” shares fund of £5.6 million. However, on the 29th of June 2018, the C and D shares funds were merged with the Ordinary Shares fund, which was then merged with the FWT Share class just over five years later.

As of the 31st of March 2024, the number of FWT Shares in issue was 32,445,165, with investments made into 30 companies totaling £20.2 million. The Net Asset Value (NAV) per share at this time was 98.8p.

So far, the strategy’s first two exits, Codeplay and Flusso, have generated returns of 16 times and 3 times the capital invested, respectively.

The Foresight Technology VCT PLC, which is currently closed to new investors, aims to target UK unquoted companies that it believes will achieve the objective of producing attractive returns for shareholders.

A further launch is planned for mid-September of this year.

As you close out this month’s newsletter, we hope you’re walking away with fresh insights. At We Complement, we’re more than just a resource—we’re your partner in helping your clients achieve their goals. We know that every client is unique, and we’re here to help you tailor investment strategies that not only meet their needs but also reflect their aspirations. Whether your clients are looking to optimise their tax planning, diversify their investments, or explore new financial opportunities, we’re right here with you, ready to support your efforts. If you’re looking for more personalised guidance or have any questions, don’t hesitate to get in touch with us. Let’s work together to simplify the complexities of specialised investments and make a real difference in your clients’ financial lives.

In this issue, we’re bringing you a roundup of industry innovations designed to streamline your processes, enhance client service, and keep you at the forefront of financial technology. From Aegon’s cutting-edge pension transfer comparison service to Plannr’s game-changing integration with Transact, these updates are set to transform how you operate and succeed.

Aegon’s Pension Transfer Comparison Scheme

Aegon has just unveiled an innovative pension transfer comparison service, making it easier than ever for members to evaluate their old pensions. The new ‘red, amber, green’ system, developed in partnership with The Pension Lab, allows users to retrieve and assess their pensions with ease.

Here’s how it works: pensions are categorised as red, amber, or green based on their features and associated charges. Only those pensions without additional valuable features, and where the fees post-transfer into an Aegon plan are lower, receive a green rating. On the other hand, pensions with guarantees, such as defined benefit schemes, are marked red.

After a successful pilot phase, Aegon is offering members the convenience of a fully digital transfer process—no more paperwork. Transfers now take just over two minutes, saving both time and money. Excitingly, Aegon plans to extend this feature across all its Workplace platform products later this year, gearing up for the launch of Pension Dashboards in 2026.

Nick Roy, Aegon’s Director of Client and Partnership Development, commented: “Our collaboration with The Pension Lab is a significant step forward, offering our members a seamless and secure way to manage their pensions. This aligns perfectly with our commitment to enhancing the member experience.” Scott Phillips, CEO and founder of The Pension Lab, added: “Through our collaboration with Aegon, we’ve delivered another industry first with the provision of a fully digital non-advised pension transfer solution, which includes pension finding, detailed feature checking, and a bespoke charge comparison.

https://www.lifeinsuranceinternational.com/news/aegon-unveils-pension-transfer-comparison-service/?cf-view

Aegon unveils pension transfer comparison service

Standard Life’s New Annuity Tracker Service

Standard Life is making strides with Origo’s new Annuity Transfer Tracker service, revolutionising how advice firms manage pension-to-annuity transfers. This service, an extension of Origo’s Transfer Service, provides advisers and paraplanners with real-time updates on the progress of their clients’ transfers, all at the click of a button.

Jon Scannell, Head of Annuity Distribution at Standard Life, emphasised the benefits: “The Annuity Transfer Tracker will streamline our service, enabling advisers to quickly access transfer statuses and keep their clients informed. It’s a game-changer for both efficiency and customer service.”

Origo’s CEO, Anthony Rafferty, highlighted the broader industry impact: “Our new tracker significantly cuts down on time and resources for both providers and advisers. With seamless API integration, this service exemplifies how we’re connecting the industry to enhance performance and service delivery.”

Standard Life rolls out new annuity transfer tracker service

Plannr and Transact’s Integration to Boost Adviser Efficiency

Plannr Technologies and Transact have joined forces to supercharge the efficiency of financial advisers with a new integration. This partnership is set to drastically reduce the time spent reconciling income statements for financial planning practices across the UK.

By utilising Transact’s enhanced API, advisers can now feed income statements directly into Plannr’s Income Reconciliation Engine, eliminating the need for manual uploads and reducing the potential for errors. This integration is immediately available to all Plannr subscribers.

Gareth Thompson, Plannr’s Director, shared his enthusiasm: “This integration is perfectly aligned with our mission to equip advisers with cutting-edge tools. We’re setting a new standard in financial services for income statement processing.”

Transact’s Chief Executive, Jonathan Gunby, echoed this sentiment: “We’re thrilled to offer advisers a streamlined and secure process, eliminating manual work and saving time. Our collaboration with Plannr has been incredibly fruitful, and we look forward to further innovations together.”

LIVE! New Integration with Transact Automated Remuneration Statements

LCP’s New Tool for Widows & Widowers to Check State Pensions

In light of recent errors by the Department for Work and Pensions (DWP) affecting state pension claims, LCP has introduced a new online tool to assist widows and widowers in checking their state pension entitlements. The DWP has already paid out over £280 million in arrears to more than 23,000 individuals who missed out on inherited state pensions.

Given the complexity of the rules, LCP’s tool aims to simplify the process, helping individuals understand what they are entitled to inherit alongside their own state pension. If you or your clients want to explore this further, you can find the tool by clicking here.

DWP making new errors on widows’ state pensions – LCP launches new tool to help people check

At We Complement, we’re committed to equipping financial advisers with the tools and insights they need to succeed. If you’re looking to enhance your practice and better serve your clients, explore our tailored solutions designed to streamline your processes and elevate your business. Get in touch with us today to discover how we can support your growth.

Keeping You Informed on the Latest Regulatory Changes Impacting Financial Services

Welcome to the August edition of Regulation Round-Up, our monthly newsletter. Each month, We Complements’ Hannah Keane covers the key stories from HMRC and the FCA, along with other important updates on financial services regulations.

FCA calls on firms to improve treatment of politically exposed persons (PEPs)

The FCA has recently had some concerns about how firms are meeting the requirement to undertake enhanced due diligence on PEPs. Because of this, the FCA has reviewed how firms are treating PEPs.

The FCA found that most firms didn’t subject PEPs to excessive or disproportionate checks, but they stated that all firms could improve their treatment of PEPs. They are proposing some changes to guidance, summarised as follows:

• UK PEPs should be treated as lower risk than non-UK PEPs

• Non-executive board members of civil service departments should not be treated as PEPs solely for that reason

• Firms should have  greater flexibility in who can approve or sign off PEP relationships

The guidance is open for consultation until 18 October 2024.

The critical role of PEP compliance in financial institutions

FCA changes listing rules for companies seeking to list their shares in the UK

The FCA has set out a simplified listings regime, starting from 29th July 2024, for companies who want to list their shares in the UK. The FCA’s hope is that this will boost growth and innovation by streamlining the listing process and removing frictions to growth once companies are listed.

These proposals are in response to the UK Listing Review. In 2021, the Review found that “the number of listed companies in the UK has fallen by about 40% from a recent peak in 2008.”

The FCA has said that the new rules involve allowing greater risk, but that the changes will “better reflect the risk appetite the economy needs to achieve growth.”

The FCA states that the changes are the “most significant changes to the UK’s listing regime in over 3 decades.”

The final rules are set out in Policy Statement PS24/6.

FCA issues ‘call for information’ on big tech and digital wallets

The FCA, jointly with the Payment Systems Regulator, is looking to gather information on the benefits and risks of digital wallets. As well as looking to understand the benefits of digital wallets, they want to understand whether digital wallets could raise problems with competition, consumer protection or market integrity.

The call for information is open until 13th September, and the regulators will analyse all responses received and provide an update by Q1 2025.

In particular, the FCA and PSR are interested in hearing from all stakeholders “across the payments and wider financial services landscape”, including digital wallet providers, as well as those who use their services.

UK regulators keen to understand the future of digital wallets

Need Expert Support?

At We Complement, our team of skilled paraplanners is here to help you navigate the complexities of financial regulations with ease. Whether you’re looking for detailed analysis, report preparation, or back office support, our experts are ready to assist. Let us take the burden off your shoulders, so you can focus on what matters most—growing your business.

Get in touch today to learn how our services can streamline your operations and keep you ahead of regulatory changes.

Sustainable Investing

As we are all aware, there now is a greater focus on ESG investing. Many clients can have very strong views on the particular types of investments that they want to invest in or avoid. This can be something that resonates with the client on a personal level, or maybe they just feel that they can make a small difference with their investments.

Because of the increased criteria that is placed upon investments to qualify as ESG, there are generally fewer underlying investments available to choose from.

Following new research at Morningstar, investors in Asia and Europe can invest in ESG without it affecting their risk exposure. Ronald van Genderen, CFA (Senior Manager Research Analyst) states the following: “This is because sustainable funds, whether active or passive, generally differ very little in size and style exposures to their conventional counterparts, thus providing a reassuring option for investors seeking to invest sustainably,”

Source: Switch to sustainable investing has minimal impact on risk exposure, says Morningstar

This is good news for ESG investors, as they can be safe in the knowledge that their portfolios can retain their diversification and not be weighted too far in one particular sector or region.

Investing in the ‘Magnificent Seven’

The Magnificent Seven is a group of stocks from high performing and influential companies in the US Stock Market. These companies are Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia & Tesla.

Over the past five years, these companies have demonstrated impressive performance, especially NVIDIA, which has achieved a remarkable return of approximately 3,000%. Each of these companies is deeply invested in technology and AI, positioning them at the forefront of their respective fields.

In addition to this, they are all companies with a strong brand recognition, which means that their customers are extremely loyal. This will likely lead to further growth in the future, a constant income stream and continued focus on technology.

These seven firms have dominated markets over the last few years.  For example, 30% of the returns within the S&P 500 over the last year have come from Nvidia alone. While this performance is impressive, it does lead to questions about the future performance of these indices.

In their latest market update, IBOSS Asset Management state the following:

“This heavy reliance on one company’s performance should raise concerns about the of market gains driven by a narrow segment of stocks. The critical question is how long Nvidia can continue to drive the stock market higher or when it will trigger a downturn. The answer lies in the company’s future performance and market dynamics. While the AI sector’s growth potential remains robust, any adverse earnings reports or unforeseen challenges could significantly impact Nvidia’s stock price and, by extension, the broader market.”

Source: The Magnificent Risk?

US Politics

On 21st July 2024, current US President Joe Biden confirmed that he will no longer run for a second term in the upcoming elections. He has since backed Vice President Kamala Harris in her bid to become the Democratic Party presidential candidate.

While her appointment will not be confirmed until the Democratic National Convention on 19th August 2024, it is essentially a foregone conclusion that she will be given the nod.

In the week since receiving Joe Biden’s backing, her election campaign has raised $200m, of which 66% has come from new donors.

Prior to Joe Biden’s announcement, it was anticipated that Donald Trump would almost certainly be elected as the new President. However, polls now show that this is not necessarily the case, and the race is now much tighter than it previously was.

In their recent market update, Close Brothers Asset Management discuss the way these events affect the markets:

“Under a Trump victory, we expect to see an escalation of trade tensions with China, Mexico and Europe, as well as an attempt to extend the Tax Cuts and Jobs Act, with partial measures to fund the lower receipts this would entail. A Harris win could mean some of the measures proposed in Joe Biden’s original Build Back Better plan are followed through with, accompanying revenue measures.”

Source: Article display Close Brothers AM

The lead-up to the US election on November 5, 2024, promises to be a very interesting time. We will be closely monitoring this period to observe how the markets continue to react to the evolving political landscape.

As we navigate the exciting and unpredictable times ahead, particularly with the upcoming US election, staying informed and prepared is crucial. At We Complement, we pride ourselves on being your go-to technical experts. Our deep insights into market trends and technological advancements ensure you have the knowledge and strategies you need to thrive. Stay connected with us for expert analysis and advice, and let us help you navigate the complexities of the market with confidence. Get in touch with us today.

Structured Products are pre-packaged investments that combine a traditional asset with one or more derivatives (financial contracts, set between two or more parties, that derive their value from an underlying asset, group of assets, or benchmark).

When new contracts are issued, all investments in a particular plan initiate simultaneously on the same day, with the idea being that they are held until a triggered maturity, at which point, all investors exit together, achieving a pre-determined outcome on identical terms.

Broadly, Structured Products can be divided into two categories: Structured Deposits, which offer protection for your capital in line with the FSCS limits (often considered more of cautious investment) & Structured Investments which rely on third-party institutions to meet their investment aims and therefore also carry the risk of loss to your capital.

The Risks

Although the returns are typically determined by movements in the underlying index, deposit-based and capital protected structured plans often purport to offer an element of security that capital will be returned in full at maturity.

While you could be fooled into thinking that Structured Products therefore sound relatively risk-free, effectively guaranteeing the return of the original investment, it is important to consider that a return of capital only would equate to a net loss in real terms (known as inflation risk).

Furthermore, if the markets were to experience a significant drop, as happened during the 2008 financial crisis, this could, as with any investment, lead to a loss (market risk).

In connection to the above, depending upon the type of Structured Product, in the event of default or bankruptcy of the provider (known as credit risk), your capital may or may not be protected by the FSCS and you may therefore, receive less than you originally invested.

There is also a relative lack of liquidity associated with Structured Products which is compounded by the fact that the full extent of any returns are not realised until maturity.

As such, if the risks are not fully understood and the investment fails, this could leave an investor financially vulnerable.

The UK Retail Sector – Issuances

In the UK retail sector, between January & March of this year, 204 Structured Products were issued, which represents an increase of around 13% from the same period in 2023. Of the 204 Structured Products that were issued, 63 were deposit-based & capital ‘protected’ plans, according to Max Darer, writing for structuredproductreview.com.

Amongst the providers issuing these plans, Walker Crips, MB & Meteor were the largest issuers by volume over this period.

Q1 of 2024 also welcomed the introduction & re-entry of two counterparties to the UK sector, in the form of Canadian Imperial Bank of Commerce (CIBC) & Santander UK. CIBC was introduced as a new counterparty to the UK retail sector, offering their products via a new provider; hop investing, who are appointed representatives of Meteor Asset Management. After taking a several-year-long hiatus from the market, Santander UK returned offering solely deposit-based contracts via Walker Crips.

Although not classed as a Globally Systemically Important Bank (G-SIB), CIBC is a North American financial institution, and one of the highest rated banks by credit rating agencies participating in the UK retail structured product sector.

The introduction of CIBC & re-introduction of Santander UK not only adds further diversification to the sector, allowing investors to spread counterparty exposure, but also demonstrates continued growth and development for structured products.

The UK Retail Sector – Maturities

When considering the maturity results, the first quarter of 2024 saw the FTSE increase by 2.84% which lead to the maturation of 80 UK retail Structured Products, all but one of which yielded positive results. This is due to the contract not having exposed investors to the risk of loss as it was a deposit-based contract which was linked to the EVEN 30 Index.

Q2 of 2024 brought with it record breaking closing levels of the FTSE, achieved in mid-May, which resulted in 198 maturities and just two contracts returning capital only. Similarly to the singular contract returning capital only in Q1, these plans were deposit-based contracts, linked to the EVEN 30 Index. As such, this result is not totally surprising.

Max Darer comments that, with ‘over 77% of Q2 maturities being solely linked to the FTSE 100 (or FTSE CSDI), these elevated levels have ensured a high volume of early maturities for autocalls and other plans with early calls. Other commonly used indices that are often used in conjunction with the FTSE are also at or near all-time high levels, again warranting ample positive maturities.’

With so many positive results at just over half way through the year then, it appears that the UK retail sector could be in for a bumper year.

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Our solutions offer tailored strategies to navigate the complexities of structured products, ensuring your clients’ capital is not only protected but also poised for growth. With a focus on mitigating risks and maximising returns, We Complement provides you with the tools and insights necessary to help your clients make informed decisions in today’s dynamic market.

Enhance your service and build stronger client relationships with our CIP & CRP offerings.

Contact us today to learn more and elevate your practice with confidence.

Welcome to the latest edition of Tech Talk, your go-to source for what’s new and noteworthy in the fintech world. This month, we’re focusing on the exciting developments in wealth management and the innovative technologies that are shaping the future of financial services.

PIMFA WealthTech: Driving Innovation in Wealth Management

PIMFA WealthTech has launched a next-generation digital marketplace and industry network, aimed at fostering collaboration between wealthtech companies and wealth management firms. This initiative aligns with one of PIMFA’s key objectives: enabling digital business transformation through the adoption of market-leading technology.

In collaboration with NextWealth and CISI, PIMFA WealthTech has introduced the Financial Advice Business Benchmarks report. This annual market research report helps firms benchmark their proposition and stature, covering areas such as client growth, advice tech, advice charges, and industry trends.

Participating in this survey offers firms a valuable opportunity to contribute to a broader industry perspective and gain insights into their market position.

Firms can participate in this year’s survey here.

Enhancing Client Onboarding with Automation

PIMFA WealthTech and EY proudly present their latest report, “New Technology and Client Expectations in Wealth Management: A Focus on Client Analytics and Onboarding.” This report highlights evolving client expectations and the need for investment in new tech and data, featuring insights from their tech sprints with fintech firms.

Automation technologies are revolutionising client onboarding, improving efficiency and accuracy. Wealth managers can reduce onboarding time and costs by up to 50%, enhancing the client experience and fostering long-term relationships. Benefits of fintech solutions include:

• Enhanced efficiency

• Higher customer satisfaction

• Increased security and compliance

• Cost reduction

• Richer data-driven insights

Discover more here.

WealthOS: Transforming Digital Wealth Management

WealthOS is a cloud-native, modular platform designed to streamline the backend operations of digital wealth management. This platform allows wealth managers to focus on creating exceptional customer experiences by automating and orchestrating processes, reducing operational time and costs.

WealthOS enables rapid market entry for new products, achieving a 3x faster and 40% cheaper launch compared to other solutions. Founded in 2019, WealthOS is committed to building digital infrastructure that promotes equitable financial access globally.

Shri Krishnansen, Chief Commercial Officer at WealthOS, emphasised the importance of seamless client onboarding in securing client relationships. WealthOS provides the agility and speed required for digital transformation, addressing the challenges of disjointed and resource-heavy onboarding processes in the wealth management industry.

Moneyinfo: Award-Winning Mobile Experience

Moneyinfo has been recognised with the ‘Best Mobile Experience for Private Clients’ award at the Goodacre Systems in the City Awards 2024. This accolade underscores Moneyinfo’s dedication to delivering superior mobile experiences for its clients.

Key features of the Moneyinfo mobile app include:

• Client-Centric Design: Intuitive interface for easy financial management.

• Cutting-Edge Technology: Integration with leading portfolio management solutions for real-time updates.

• Unparalleled Security: Advanced encryption and security protocols.

• Proven Results: Increased user engagement and reduced operational costs.

Supporting over 180 firms, Moneyinfo stands out as a leader in client portal technology, offering features like consolidated portfolio reporting, secure document sharing, workflow automation, and advanced account aggregation.

Check out the other winners at the Goodacre UK Systems in the City Awards 2024 here.

The fintech industry continues to evolve, bringing innovative solutions that enhance efficiency, security, and client satisfaction in wealth management. From PIMFA WealthTech’s digital marketplace to WealthOS’s modular platform and Moneyinfo’s award-winning mobile app, these advancements are setting new standards in the financial advisory sector.

Stay tuned for more updates and insights in our next edition of Tech Talk for all the latest in fintech and wealth management innovation.

Follow us on LinkedIn and visit our website for more information.

Welcome to our new monthly newsletter, Regulation Round Up. Once a month I’ll be covering some of the main stories to come out of HMRC and the FCA, as well as anything else related to rules and regulation in financial services.

In general, the last month hasn’t offered much in the way of interesting regulatory updates. However, there is one particular story that I think is worth looking at, alongside a more general exploration of some recent decisions by the FOS which I think could be interesting to those in the UK financial planning space.

Intelligent Money Enters Administration

Intelligent Money, the SIPP provider, has entered administration following a final decision from the FOS. I haven’t found any specific information about this case, but FCA states that it was “regarding some of the investments [Intelligent Money] allowed within its SIPPs.” Due to the financial liabilities associated with this complaint and other similar complaints, the company has entered administration.

FOS Decisions

Looking for more information on the Intelligent Money case led me down a rabbit hole on the FOS website, and I found some recently upheld decisions that I think make for interesting case studies. The outcomes of some of these cases might be surprising to some and may serve as an alarm bell to change their processes.

I’ve rounded up some cases and outlined some of the most interesting parts of the decisions below, but I recommend reading the decisions in full to get a proper understanding of the cases and the ombudsman’s rationale.

DRN-4728029 – Complaint regarding annual review service

In a nutshell, the client complained that his adviser didn’t provide him with the ongoing services he had paid for. He signed up for ongoing advice in 2016, and as part of the service the adviser agreed to provide annual reviews.

The adviser emailed the client in 2017, 2018, and four times in 2019 to arrange an annual review meeting. The client didn’t respond to any emails and no meetings went ahead. In 2019, another email was sent to the client asking him to complete a form, which he replied to, but he didn’t reply to a subsequent email asking to arrange a meeting, nor any emails sent between 2019 and 2022 in which the adviser tried to arrange a meeting. It’s worth noting that the client had told the adviser that email was his preferred communication channel.

The client complained that he has paid for an ongoing service which he hadn’t received, and the FOS have upheld this complaint, ordering the adviser to pay compensation to the client. The reasoning is that the firm’s attempts to contact the client weren’t sufficient to fulfil their obligations as set out in the agreement.

DRN-4761739 – Complaint regarding annual review service

The client signed up to a service that included annual face-to-face meetings and interim review meetings, among other things. Similar to the above, the adviser made attempts to arrange a meeting, but the meetings never went ahead.

In one year, the adviser emailed the client to offer to arrange a review meeting or, if the client preferred, to just send a valuation via post. The client opted for the second option. The FOS argue that the tone of the email was leading and made it easy for the client to agree to receive the valuation “but that wasn’t the service owed to him”.

In another year, the firm sent the client a review letter and offered to meet to discuss if the client wished. The client didn’t ask for a meeting, and the FOS said that this isn’t enough for the firm to fulfil their obligations.

In 2020, the firm emailed the client to arrange a catch up meeting, and the client asked for a valuation instead as he didn’t want to see anyone due to the pandemic. No meeting went ahead. The FOS argue that the firm should have clearly offered a phone call or online meeting instead.

The firm argued that they shouldn’t be bound to provide the client with the full service if he can refuse it, but the FOS disagreed. As far as they are concerned, “The terms of the agreement were clear. They didn’t allow either party to amend its consideration.” They suggest that the firm should have renegotiated the terms of their agreement with the client and changed his ongoing service if he wasn’t going to have regular review meetings.

DRN-4654653 – Complaint regarding a personal pension transfer

This case involves a client who was advised to transfer a small personal pension to a SIPP.  She was unhappy with the performance of the investments within the SIPP and wanted to sell them, but some of the underlying investments were illiquid so couldn’t be sold. The firm argued that the SIPP was opened on an execution only basis, and that, while the investments didn’t perform well, they were suitable for the client’s risk profile and objectives.

This complaint was upheld by the FOS. While there’s a lot more going on with this case, something worth highlighting is that part of the complaint relates to whether or not the recommended investments were suitable for the client.

The FOS say that the client’s attitude to risk was consistently recorded, but that she provided different information relating to income, expenditure, cash savings, and investment experience across two different fact finds. According to the FOS, this means that the information used to provide the advice wasn’t accurate or consistent, so the investments can’t be considered to be suitable.

The takeaway here is that, if there are question marks surrounding information provided by a client, you need to query it.  While it can sometimes feel difficult or intrusive to ask for further information, without getting the KYC stage right you can’t be sure that your advice is suitable, and as far as the FOS is concerned it doesn’t matter that the client provided you with inaccurate information.

DRN-4732159 – Complaint regarding a personal pension transfer

Similar to the previous case, this is another pension transfer complaint. In summary, the client (61 and planning to take benefits from 67) was advised to transfer his existing pension to a SIPP and to invest in a DFM. The reasoning for this was that the new plan was significantly cheaper (excluding ongoing adviser fees), and that the old plan only offered two ways for the client to access his pension: full encashment or buy an annuity.

Two years later, he raised a complaint as he believes the advice was unsuitable and he’s suffered financially because of it.

The FOS upheld this complaint. They stated that having a wider range of ways to access the pension wasn’t a good enough reason to recommend a transfer, as the client wasn’t planning to access his plan for six years.

The FOS also stated that the pension switch wasn’t right for the client as he had no need for a SIPP, and a more basic arrangement would have been fine. Despite the new plan being lower cost (ignoring adviser fees), the FOS state that, overall, the new plan would cost more than the old plan. The FOS said that the argument that the new plan is lower cost excluding adviser charges doesn’t justify the recommendation if ongoing advice wasn’t something the client really needed, which they believe he didn’t.

The key points here are that cheaper pensions aren’t a get out of jail free card when it comes to pension transfers, and moving for more flexible pension access options is only good enough rationale if the client wants to access their pension in the very near future.

This month’s roundup highlights the importance of adhering to service agreements, the need for consistent and thorough client information, and careful consideration of cost and access options in pension transfers. These cases underscore the crucial role of detailed, client-focused advice in maintaining compliance and avoiding complaints.

Are you looking for professional support to navigate these complexities and ensure your practice meets regulatory standards? The We Complement paraplanning service is here to help. We offer comprehensive paraplanning solutions designed to enhance your advisory processes, ensure compliance, and provide tailored support for your business needs.

Find out more here

Stay tuned for more regulatory updates and insights next month.

Helpful Links

• FCA Homepage

• Financial Ombudsman Service

• Money Advice Service

• PIMFA (Personal Investment Management & Financial Advice Association)

Politics and elections have dominated the thoughts of the markets and investors alike recently. In this article, I am looking at the ways in which these upcoming elections will affect the markets over the coming months.

UK

The General Election was held yesterday, and over the last few months, the markets have been shifting to reflect the expected change in Government (this post was written before the results have been announced).

Prior to the announcement of the election, UK stocks had been out of favour, but investors have been gradually moving back towards these stocks in the expectation that there will be more political stability following the election. This will almost likely continue in the next few weeks as more certainty is known about the Government’s policies.

In their recent market update, IBoss have stated the following:

‘We believe UK equities are well placed to outperform from here regardless of the election result. The market is considerably cheaper than normal, both in absolute terms and relative to the rest of the world and looks good value. Importantly, the UK economy is also now growing again and interest rates should start to be cut later this summer.’

Source:

Market Update | Election Special

The expected change in Government will also bring about changes in Tax. Labour have announced that they will not raise the following taxes:

• National Insurance Contributions
• VAT
• Income Tax (Basic and Higher Rates)

However, there has been no indication regarding Capital Gains Tax, so it is possible that this is one area where there may be changes in the future – With the annual exemption having already reduced significantly in the last couple of years.

Labour has also stated that they will change the way that ‘Non Doms’ are taxed, although they haven’t given much information about this in their manifesto.

The Lifetime Allowance was abolished on 6th April 2024, and replaced with the Lump Sum Allowance (LSA) and Lump Sum Death Benefit Allowance (LSDBA). Labour had previously stated that they intended to re-introduce the Lifetime Allowance if elected, but this was quietly dropped in the run up to the election.

This was no doubt a relief for many within the industry, as we have all had to adapt to the new regime and it would no doubt cause many issues going back to the old Lifetime Allowance system.

US

The US General Election is due to be held on 5th November 2024 and we are in the midst of the televised debates between Joe Biden and Donald Trump.

Much has been of Biden’s performance in this debate and whether he should remain in contention for the election. The polls now indicate that Trump is in the lead and will likely be the next US President.

However, this uncertainty doesn’t seem to be affecting the markets, as detailed in the recent Close Brothers market update:

‘In terms of US investment implications, these are likely to loom into focus for markets in a more meaningful way as the election approaches. Fortunately for markets, either a Democrat or Republican victory is likely to be tolerable for markets. Trump would be expected to increase spending, which could support growth but would also increase borrowing, while a Democratic win could see some increases to taxation. Control of the Senate and Congress is also worth consideration – single-party control of both the presidency and congress will allow greater flexibility with law-making.’

Source:

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France

President Emmanual Macron recently called a snap election in France following the poor showings in the recent European parliamentary elections.

The first stage of these elections took place on 30th of June and then the ‘run off’ is taking place on the 7th of July.

Marine Le Pen’s National Rally Party is leading following the initial stage. However, they may not receive enough votes to form a majority Government, with the other parties scrambling to unite in order to try and prevent this.

As stated in the IBoss Market Update (same source as above), any results from this election will likely mean uncertainty within the markets:

‘A government led by either would herald an era of uncertainty, a higher budget deficit and more anti-European stance and French markets have duly sold off on this prospect. French equities are down 5% or so since the election was called and bond yields have also risen.’

We will be keeping a close eye on all developments in the coming weeks and months, as the results of these elections will greatly affect the markets moving forward.

Looking to navigate these changes with confidence? Discover how our CIP and CRP services at We Complement can help you make informed investment decisions and help you provide your clients with the best advice and solutions in these dynamic times.

Reach out to us today to learn more!