1. Learning & Development Event
Regulatory Update
Spring 2015

2. Learning Objectives
Identification of changes to the advice process following pension reforms
Understanding the need for research and due diligence to support the advice process
Awareness of the latest regulatory developments
Understanding of the key areas of regulatory focus over the coming twelve months

3. Pensions – The Journey

4. Advice Cycle
Changes?

5. Advice Cycle ATR Compliance Client Suitability & Best Interest
PII
Review
Monitor
&
Review
Target
Clients
Present
Solution
Fact-
Find
Regulation
Regulation
Research
ATR
Analysis
Compliance

6. Professional Indemnity

7. Insurers Views?
FAD / UFPLS
Full Fund Withdrawal
Advised / Non-Advised
Insistent Clients
Scope of Permissions

8. Advice Cycle ATR Compliance Client Suitability & Best Interest
PII
Review
Monitor
&
Review
Target
Clients
Present
Solution
Fact-
Find
Regulation
Regulation
Research
ATR
Analysis
Compliance

9. Clear, Fair and Not Misleading / Balanced
Targeting Clients
Existing clients only
MAS Directory
Advertise
Execution Only services
Phone
Website
Clear, Fair and Not Misleading / Balanced

10. Who do you want to deal with?
Type of Clients?
Who do you want to deal with?
Clients with a minimum level of retirement funds
Clients who provide a direct instruction
Vulnerable Clients?
Debts
Inexperienced investors

11. Advice Cycle ATR Compliance Client Suitability & Best Interest
PII
Review
Monitor
&
Review
Target
Clients
Present
Solution
Fact-
Find
Regulation
Regulation
Research
ATR
Analysis
Compliance

12. Disclosure
Cost of Advice?
Advice only or Advice and arrangement of a recommended solution
Be careful of contingency charging – Conflict of Interest?

13. Factfinding
Need for income
Capital expectations
Cashflow modelling
State benefit entitlement
Use open ended questions

14. Verify and utilise information
Gathering Information
Verify and utilise information

15. ELECTRONIC VERIFICATION THE SAFEST OPTION
Client Verification
EU Money Laundering Directive – The Fourth!
Wider definition of Politically Exposed Persons
More checks on Companies and Trusts
Government Sanctions Lists and other registers
ELECTRONIC VERIFICATION THE SAFEST OPTION

16. Advice Cycle ATR Compliance Client Suitability & Best Interest
PII
Review
Monitor
&
Review
Target
Clients
Present
Solution
Fact-
Find
Regulation
Regulation
Research
ATR
Analysis
Compliance

17. Repeatable process that includes; Risk questions Capacity for loss
Client Risk
Repeatable process that includes;
Risk questions
Capacity for loss
Need for income
Desire for capital
Experience and knowledge
Information which is not in the factfind

18. Advice Cycle ATR Compliance Client Suitability & Best Interest
PII
Review
Monitor
&
Review
Target
Clients
Present
Solution
Fact-
Find
Regulation
Regulation
Research
ATR
Analysis
Compliance

19. Analysis

20. Combinations of the above
The solution
Flexi Access Drawdown
Uncrystallised Fund Pension Lump Sum
Annuity
Combinations of the above
Full withdrawal
Facilitating a Switch or Transfer

21. Pension Transfers Change to the Regulated Activities Order
Pension Schemes Bill
New definition of a Transfer
No longer exempt if crystallising benefits
Some Personal Pensions included
Exempt if transferring to an annuity?

22. Regulated Activities Order
This brings pensions that were regulated by The Pensions Regulator into FCA remit
DB to DC or DC to DC schemes become an FCA regulated activity
Firms must apply for FCA authorisation
The RAO does not establish the regulatory framework or define a pension transfer

23. Pension Schemes Bill
Applies to trustees of DB schemes
If a member transfers/converts to flexible benefits the trustees must check the member has received advice
This is unless;
the member’s scheme value is less than £30K, or;
an annuity is being purchased

24. FCA Definition of a Transfer
Proposal includes;
Transfers from and to occupational schemes
Transfer/conversion of DB/DC schemes to access flexible benefits
Transfer DB/DC schemes to a PP or SHP
Transfer of safeguarded benefits to a PP or SHP
Safeguarded benefits including GARs in PPs

25. Pension Transfer Specialists
PTS must conduct or check advice
No additional qualifications are required
GARs in PP – PTS not required but permission needed
TVAS required for all DB schemes transfers

26. FCA Definition of a Transfer
These proposals are under Consultation but take effect immediately! Final rules expected June 15

27. No action if firm already authorised for transfers
Actions?
No action if firm already authorised for transfers
Apply for a Variation of Permission
Qualification required
Need to demonstrate knowledge and experience!
Make a referral

28. Advice Cycle ATR Compliance Client Suitability & Best Interest
PII
Review
Monitor
&
Review
Target
Clients
Present
Solution
Fact-
Find
Regulation
Regulation
Research
ATR
Analysis
Compliance

29. A new world of changing products
Research
Secured income
OMO
Lifestyle enhancements
Flexibility
Features
Options
Benefits
A new world of changing products

30. Advice Cycle ATR Compliance Client Suitability & Best Interest
PII
Review
Monitor
&
Review
Target
Clients
Present
Solution
Fact-
Find
Regulation
Regulation
Research
ATR
Analysis
Compliance

31. Presenting the Solution
Detail in the Suitability Report;
Needs and circumstances
Why solution(s) recommended
Risks/Disadvantages
Tax implications
Sustainability of income
State benefits

32. Rejected Recommendations

33. Insistent Clients

34. Requests full fund withdrawal
Case Study
Jeff & Anne
Residential property
State pensions £12,058
Committed expenditure £12,000
Discretionary spend £2,500
PP fund of £50,000 = £2,400 annuity
Requests full fund withdrawal

35. JEFF Case Study ANNE State Pension £7,714 PP fund £50,000
Committed Expenditure £6,000
Discretionary Spend £1,800
Requests £40,000 withdrawal for Buy to Let purchase
JEFF

36. Advice Cycle ATR Compliance Client Suitability & Best Interest
PII
Review
Monitor
&
Review
Target
Clients
Present
Solution
Fact-
Find
Regulation
Regulation
Research
ATR
Analysis
Compliance

37. Reviews

38. Business Strategy Review
More people will need advice at retirement
New directories offer marketing opportunities
DB scheme members must take advice before transferring
IHT planning opportunities
NISA flexibilities

39. Business Strategy Review
Review sales process
Resource/capacity for new clients
High risk?
PI cover
Scope of permissions
Regulatory risk?

40. FCA Risk Outlook
Are firms helping consumers make the right choices following pension reforms
Annuity sales practices
MiFID II
Asset Managers – Fund Charges
Due Diligence

41. Due Diligence Review Pack

42. Any questions?