Investment Forum Regulatory Update Spring 2014

Learning Outcomes To understand the proposed changes to regulatory reporting How to ensure you are able to demonstrate and disclose your services and costs in relation to independent or restricted advice To understand the regulator’s approach regarding financial incentives and how to ensure compliance with their requirements To understand the regulatory implications of the recent changes to pension legislation resulting from the budget To gain an awareness of the regulator’s focus for 2014 SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 2

Regulatory Reporting

Regulatory Reporting SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 4

Form will be easier and clearer Elect to report on a cash Section K & L Six monthly to annual Form will be easier and clearer Elect to report on a cash received or accruals basis Section L - Removal SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 5

Accounting Solutions Regulatory reporting Maintain accurate bookkeeping records. Potential to reduce accountancy costs with better quality bookkeeping records. Produce client invoices and statements. Import bank statements. Quickly produce sections A, B, D1, D2, J & K Online so always using latest version. Dedicated support line SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 6

Services Independent Advice & Disclosure of Costs and SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 7

Delivering independent advice SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 8

Delivering independent advice “advice must be unbiased and unrestricted and must be based on a comprehensive and Fair analysis of the relevant market” SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 9

defined in the handbook as all retail investment products capable of Relevant market A relevant market is defined in the handbook as all retail investment products capable of meeting the needs and objectives of the client SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 10

Retail investment product Definition:- Life policy Unit Stakeholder or personal pension scheme An interest in an investment trust savings scheme A security in an investment trust Any other designated investment which offers exposure to underlying financial assets, in a packaged form which modifies that exposure when compared with a direct holding in a financial asset Structured capital-at-risk product SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 11

Must be willing to consider all RIPs Independence Must be willing to consider all RIPs Are firm’s advisers willing and able to advise on all RIPs? NMPIs (COBS 4.12) Referrals to another firm/adviser SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 12

Panels Must:- Be sufficiently broad in composition Be based on fair and comprehensive analysis of relevant market Be regularly reviewed Not disadvantage a client Not be a “default option” Consider Off-panel solutions SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 13

Understand limitations Platforms Understand limitations Must present all RIPs without bias or restriction Review regularly Off-platform solutions Research platform market & undertake due diligence SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 14

Must not be “default option” Model portfolios Must not be “default option” Ensure independent criteria is met if outsourced Must be constructed from a fair analysis of relevant market SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 15

Discretionary investment services Is it a recommendation for a RIP? Consider a wide range of investment solutions Act in best interests of client SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 16

Disclosure of costs and services SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 17

Disclosure of costs Firms must:- Disclose generic charging structure clearly and upfront Give cash examples if charge by % Give an indication of approx timescale if charge by hour Tell clients how much service will cost specific to their circumstances before they are committed to paying Be clear about ongoing charges SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 18

Disclosure of services Restricted Firms:- Must explain nature of restriction Provider Product Provider & product 31% of firms failed to either disclose or were not clear SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 19

Disclosure of services Ongoing services:- Must be clear about nature of ongoing service Use of jargon Must be clear that ongoing service can be cancelled at any time SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 20

Third cycle of Thematic Review Q3 Ensure you are meeting requirements Next steps Third cycle of Thematic Review Q3 Ensure you are meeting requirements Possible enforcement action SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 21

PENSIONS SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Regulatory guidance was required CHANGES Interim period to April 2015; Reduced income for Flexible Drawdown Increase to Triviality payments Increase to 150% of GAD for Capped Drawdown After this interim period; Full access to pension funds Regulatory guidance was required SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

General Principles The guidance relates to decisions about clients retirement income and firms need to; Inform clients to the changes to pension legislation in good time Review processes that are automated Make reference to interim period with full changes confirmed at point of advice and be considered when making a recommendation Consider if delaying an annuity could affect the rate – urgent advice where needed (Providers) should allow immediate access to customers with small pots SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Specific Guidance Clients currently considering their retirement options; Clients approaching retirement; Clients who applied for, or were in the process of applying for income drawdown; Clients using income drawdown to provide for retirement income SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

In each of these instances; Can you identify relevant clients? hh In each of these instances; Can you identify relevant clients? Do any recommendations remain suitable? Consider the target audience when communicating information Provide clear information on the changes Reconfirm existing benefits ie GARs Does your service agreement commit you to contacting the client? Are clients still within a cooling off period? SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Other Considerations Do you have a brochure of services? Do you have a website? Do you provided non-advised annuity services? Providers are being encouraged to change their contracts immediately Providers should consider increasing the cooling off period SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Other Considerations FCA have stated; ‘We are working with the Government to develop the impartial ‘guidance guarantee’ which will be offered to individuals at retirement from April 2015 and will consult widely about the detail of the standards governing this in the Summer’ SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Financial Incentives SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

All firms have incentive programmes Incentives What is a financial Incentive? An inducement is designed to make someone do something (an inducement to act) Do you have an incentive scheme? It could include; A bonus system Product sales by quantity Sales of a certain provider or product Sales of add on features Payment accelerators All firms have incentive programmes SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

The fair treatment of consumers - TCF Background Questionnaire to 400 firms This identified 800 incentive schemes Over 50% had a high risk feature Over 90% of schemes were with firms with over 100 advisers Reason for this research? The fair treatment of consumers - TCF SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Demonstration of TCF Advisers; Carry out independent file reviews Record client feedback Construct regular Management Information Follow up any areas of concern / weakness Always consider clients best interests Use our CSU for file checking service Use support documents on Vision website SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Demonstration of TCF Firms; Do not have remuneration linked solely to business written Review TCF actions plans (annually) Review Conflicts of Interests policy Review MI at board level Ensure all processes are designed in the clients best interests Have monitoring provisions in place Record keeping All documents available in Vision website Seek assurance on your next compliance visit SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Risk Outlook & Busines Plan SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Risk Outlook 7 Forward-looking areas of focus:- Technology Culture & controls Back book review Consumer credit Complex terms & conditions Housing market Retirement market SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

What Next Consumer Credit Ongoing Thematic Reviews on RDR How investment advisers are carrying out due- diligence A review of the pensions and retirement market Financial incentives – sales pressures SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781

Learning Outcomes To understand the proposed changes to regulatory reporting How to ensure you are able to demonstrate and disclose your services and costs in relation to independent or restricted advice To understand the regulator’s approach regarding financial incentives and how to ensure compliance with their requirements To understand the regulatory implications of the recent changes to pension legislation resulting from the budget To gain an awareness of the regulator’s focus for 2014 SimplyBiz Services plc, The John Smith's Stadium, Stadium Way, Huddersfield, West Yorkshire HD1 6PG. Registered in England under Company No. 04590781 Slide 38

Any questions?