Member Update 1st March 2019
Written by Charlie Palmer on 01/03/2019

Test Question

What is the new NHS Pension Scheme proposed employer contribution rate from 1 April 2019?

a) 20.6 percent

b) 16.2 percent

c) 26.6 percent

d) 22.2 percent

answer at base



Brexit perspective from Dublin

The enthusiasm of EEA countries to blackball the UK from their club is astonishing.  A Norwegian friend asked me last week, why the UK was making such a fuss about Brexit.  Works fine for us, she said!

While the FCA is busy telling us how to trade in the EEA, Ireland seems more focused on telling us how not to trade in their countries, rather than helping their own brokers trade in the UK!  Here is what the Central Bank of Ireland put out this week: and note the complete absence of any guidance for Irish firms trading abroad.

“After the withdrawal date of 29 March 2019, the UK will become a third country (non-EU) …

In the event of a “hard” or “no deal” Brexit, UK insurance intermediaries must put in place the necessary registration in order to continue operating in Ireland.  Where the required registration is not in place by 29 March 2019, those firms must cease providing services into Ireland on a Freedom of Establishment and/or Freedom of Services basis. “ article here

You can sense their glee!

The Irish will also allow UK brokers and underwriters to continue to administer ongoing insurance contracts – ie ongoing claims and those with late renewals.  This will be for a period of three years after the date of the withdrawal of the UK from the EU. 

The Bloodstock insurance industry is reeling as local agents in Ireland now are being contracted to attend as observers UK brokers meeting stud managers to renew their routine insurances.



Mifid Disclosure update – review published this week 

FCA review of Mifid has found shortcomings.  

If you pay attention to IFAC audits, follow what IFAC say and implement changes IFAC recommend, you hardly need to worry about these missives from FCA.  IFAC have you covered! 

However, on a “need to know” basis of management…..”you need to know.”

So here is your two minute guide to the FCA Mifid Disclosure review.

FCA looked at the costs and charges disclosures of a sample of 50 firms in the retail investment sector.  They wanted to understand if firms were complying with the new rules.

FCA found firms fell short when disclosing third-party costs and charges.  That means not enough disclosure of underlying UCITS and DFM transaction costs – ie the costs of buying and selling.  For instance, while most OEICs will churn up to 100% of their book annually at, say ½ per cent bid offer spread for each stock, this adds the same ½ per cent to the annual management costs – but is rarely disclosed.  But you need to disclose it!

MiFID II came into effect on 3 January 2018. Since then, firms have had to change costs and charges disclosure in annual suitability reviews. See the IFA templates on the doc library - search“guide to mifid charges”


FCA looked at IFAs, DFMs,  direct-to-customer investment platforms and other investment managers (who don’t actively advise themselves).  They looked at websites (a particular favourite of theirs) and your communications to your clients in SRs and statements.  

As a reminder, firms must give clients information on all costs in good time before arranging the deal. 

This is the ‘ex-ante’ (before the event) disclosures. 

And then again ‘ex-post’ (after the event) disclosures must be made annually.

As usual, there was confusion in the market and no consistent interpretation of the rules.  But it was clear that “most of them had given this serious consideration and were trying to comply with the rules.”

FCA found examples of good practice that they particularly liked

  • Some firms have provided training for staff and testing their staff's understanding of these rules – yippee to the BAT financial exam system!
  • Firms that offered non-MiFID products (pensions and insurance bonds) were often applying the MiFID II disclosure standards to these products – Bravo to those leaders!
  • Some firms had interactive sliding scale pop-ups and hyperlinks showing the impact of charges on investments over adjustable investment amounts and timescales on their websites.  Clever dicks! 

FCA focus in the near future is here: 

  • Calculate and disclose ‘transaction costs’ of buying and selling shares, even inside portfolios.
  • Generic advertising of low cost doesn’t make the grade.  Fine to advertise low cost, but not if it doesn’t match the final result, of “not-quite-so-low-cost-after-all-that-advice-you’ve-just-had”.   FCA told those firms to change their disclosures.  On a more granular level, this is probably just the difference between your client agreement and your letter of engagement.
  • Some  IFAs still do not always include charges as both cash amounts and percentages.  How far behind they are – what have they been doing all this time? 
  • Some firms told us that they were leaving out transaction and incidental costs and charges because they could not get the necessary data.  So they estimated the costs as zero.  FCA do not approve.


FAILS ON MIFID are own goals

Since one of the key worries the FCA have is that the market is not price sensitive, and there is almost no competition among IFAs, it follows that these fails are really just own-goals!


 PPI - What next?

Now that the PPI scandal is coming to a close more and more attention is being devoted to other claims.  We have written before about Pure Legal claims against interest only mortgages, and more is to follow from other sources.


Finance agreements for vehicles is an emerging issue– in particular the contentious calculation of the ‘balloon’ payments at the end of agreements.  This could spread into agreements for office equipment.  

For this reason IFAC believe that IFAs should apply to upgrade their FCA licences from April 1st onwards, to enable them to act as claims management firms – in effect managing claims for individuals.  This also allows you to take a cut.  Put in your request by reply. IFAC do not charge members for that service.