As with so much other financial regulation that has been brought to bear, it seems as if we have been waiting a lifetime for the new pensions legislation to take effect. However the wait is nearly over and before long we will again be looking to the horizon, whether it be to new directives coming out of Europe or things closer to home like the introduction of reversion schemes into the regulatory mix. If ever there was proof that the only constant in life is change than the personal finance market has to be it.
Preparation for the changes has been long in the planning and many are understandably keen for the rules to come into effect and see how they work on a practical level after so much theory and surmise has been thrown at them over the past months.
For mortgage brokers a lot of the excitement has come out of the proposed reforms since Chancellor Gordon Brown doused the fires that had been building in anticipation over the possible inclusion of residential property in self invested pension plans (SIPPs). The rights and wrongs of his decision have been argued in full, and there seems little doubt that the change in plan will not affect the vast majority of savers in the UK. However, it would certainly have been interesting to see how brokers, lenders and investors alike sought to take advantage of the rules and what, if any, impact it would have had on a housing market, which still smolders in the wake of the price inferno it has recently endured.
Commercial opportunity?
However, the commercial market still remains a tempting option for many and, while not seen as so easily accessible for many private investors, investment houses and financial intermediaries are working hard to change its perception. Like the residential market, it too has lost much of its heat, and a dowdy economy and wavering appetite for spending on the high-street has had its effect on this market. How brokers and their clients react to the opportunities still open remains to be seen, but it’s certainly going to be interesting to watch.
For advisers covering both the mortgage and investment markets, most will already have been working hard on their client databases ensuring their current situations will be protected and they are ready to move as fast as possible to take advantage of the changes coming into force.
Practical implications
In preparing themselves, it is important for these intermediaries not only to be on top of the theory, but also be aware of the practical implications of the new legislation. The relevant exams affecting advice given in this arena have already been altered to include the changing regulations. From the Institute of Financial Services (ifs) point of view, the exams that have been changed are the Certificate in Mortgage Advice and Practice (CeMAP) and the Certificate for Financial Advisers (CeFA). While the actual exams sat by advisers before 6 April will be no different, the learning materials for those taking the qualification thereafter are already available to ensure they can be ready to take their qualification as soon as the new rules take effect.
On top of the basic qualifications that will be changed, there are also likely to be a number of practical workshops brought to market by both providers and professional bodies as they seek to ensure clients are getting the type of advice they need and, indeed, deserve. New rules, even when they are designed to bring simplification to a market, always carry with them a degree of confusion in their early days.
What advisers need to do is be able to demonstrate that not only are they au fait with the changes as they stand, but they have also taken the time to look at them in a practical light and apply them to the everyday and also more unusual situations that clients may be in. There is nothing that deflates client confidence so much as a blank look and a slightly flustered response, and those unaware of how the changes will impact their clients on a practical level are leaving themselves open to disappointment from them and also action from the Financial Services Authority (FSA), which will not take such poor competence kindly. Yes, there may have been surprise changes to some of the regulation as it was discussed and brought to bear, but too much has been written and enough time has been given for advisers to be up to speed on what is going on.
Areas of concern
For brokers there will be two major areas of concern. One is that they have protected the position of their clients in the run-up to the changes being introduced and the other that they will be geared up to take advantage, where possible, come the beginning of April. Where these opportunities are missed, advisers will need to question whether they are in fact treating their clients fairly, and if not, do something about it before the FSA does.
The problem with commenting about training is that it so often tends towards the schoolmasterly type of sermon delivered before exams to students, advising that the questions are not there to catch them out and those that have revised sensibly will have nothing to fear. However, this is very much the truth of it and the simplification of the pensions market is something that has been long incoming. Intermediaries that have not acquitted themselves appropriately in terms of their knowledge will ultimately be doing a disservice to both themselves and their clients.
Those that have done their homework will already have been proving this to clients and setting the standards for others to follow. They need to do so before it is too late.
