IFAs and wealth managers come into conflict

August 18, 2008 | posted by Matthew Ward in Insight, Investment, Pensions, Service | comments (0) |

A recent article in Professional Adviser saw Barclays Wealth supremo, Mark Kibblewhite, responding to criticism from the IFA community about the levels of client service provided by large wealth management players (such as Barclays).

Of key interest here is the fact that these two entities are even having this debate when a few years back it would have been unthinkable. This says much about the fact that the pressure is on across the advice sphere to deliver a professional proposition and service to clients.

Defaqto has observed the closing of the gap between the retail and private banking sectors in its 2007 and 2008 wrap market reports.

Firstly, retail providers and advisers are aiming to upgrade their propositions to target more profitable business in the form of wealthier individuals. Secondly, private banking operations are being minded to protect existing business and target new business via the identification of ‘would-be’ wealthy individuals.

Hence the two industries are coming into contact more regularly in the contest for ‘holistic’ wealth management business. Watch this space for further conflict between the main players…

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Political parties need to work together to achieve the greater pensions good

July 8, 2008 | posted by Matthew Ward in Insight, Investment, Pensions | comments (0) |

A recent consumer survey undertaken by Friends Provident found that two-thirds of Brits have little or no faith in the Government when it comes to pensions. This sentiment comes as no real surprise in the current climate and echoes similar findings from Defaqto’s Retirement Savings & Income Report 2007.

Defaqto asked1 1,065 UK consumers which political party they trusted to solve the pensions problem. Although at the time Labour (25%) were more trusted than the Conservatives (12%) and Liberal Democrats (4%), the resounding result was that 57% trusted none of the political parties to solve the pensions problem. 

Although a particular stance on pension policy could be seen as a vote winner for an individual party it would seem that it is high time for all parties to work together towards improving trust in Government and its prescribed pensions system. Particularly when the long-term commitment required to deliver consistent pension policy is taken into account.

When asked how they would solve the problem of people having inadequate savings for their retirement and relying solely on the basic state pension, one-third of the consumers in Defaqto’s sample felt that it should be compulsory for everyone who works to contribute to a personal pension plan.

This is a sign that consumers have a growing awareness of the fact that serious action needs to be taken, even in the form of compulsory pension contributions which may previously have been viewed as an unpalatable solution.

Perhaps auto-enrolment into Personal Accounts is a stepping stone but the Government will still be under pressure to deliver this initiative on time and provide proof positive to the general public that it is better to save for retirement via this national scheme than rely on state benefits. By working together and putting out consistent messages the parties may have more chance of meeting these objectives.   

1Research carried out for Defaqto by GfK NOP from 30th August to 4th September 2007

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Consumers needn’t be in the dark over key pensions tax incentives

April 4, 2008 | posted by Matthew Ward in Investment, Pensions | comments (1) |

Defaqto don’t give out an award for “Most simple and effective pensions marketing material of the year” but if we did my vote would probably go to Hargreaves Lansdown. Along with their end of tax year call to arms for ISAs, HL ensure that they urge potential and existing clients to take advantage of similar pensions tax advantages.

Without the use of industry jargon HL’s marketing material, sent directly to consumers in HL mailshots or available on the HL website, explains the following terms in a very concise but effective manner: 

  • Annual pension tax allowance
  • Tax relief available to basic/higher rate tax payers on pension contributions
  • Legislative update on tax relief terms

This type of material is to be applauded and is a necessity if more UK consumers are to understand the benefits of pensions when making savings decisions, especially the underpinning advantage of tax relief on pension contributions.Research1 carried out for Defaqto’s Retirement Savings & Income Report 2007 revealed that a meagre 9% of consumers saw that pension savings plans offer good tax incentives suggesting that many are not aware of this USP.Although the research findings show that 31% of consumers do view pension savings plans as important for supporting them when they retire, 20% viewed them as a necessary evil, 16% viewed them as too confusing to worry about while a further 14% felt that pension savings plans are less attractive than other investments like residential property.If the UK is to tackle the pensions savings gap head-on consumers will need to be encouraged to engage with pensions, and other retirement savings methods, and must be made aware that ‘there is something in it for me’. Marketing campaigns which include educational content are certainly a step in the right direction. 1Research conducted on behalf of Defaqto by GfK NOP with a survey sample of 1,000 consumers

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Consider taking your annuity sooner rather than later, says Defaqto

March 25, 2008 | posted by Chloe Cottam in Insight, Pensions, Press Release | comments (0) |

Selecting exactly the right annuity to meet individual needs from the many payment options and providers available can be one of the most important decisions a person has to make. But buying sooner rather than later may be even more important, says Defaqto, the financial research company.Not only is there a realistic prospect of the bank base rate being reduced in the coming months, having the effect of bringing annuity rates down with it, buying early will both secure the current rate but also provide an income that would take many years to replace if the annuity is taken later.

A typical open market level annuity for a 65 year old man in good health, without a spouse’s income, guarantee or escalation, with a pension fund of £100,000 currently is £7,4101. The same annuity, if taken at 64, would typically be £7,2341.

So by delaying his annuity until 65, the man would receive an extra £176 per year for as long as he lived. However, he would have forfeited £7,234 by not taking his annuity at 64, and he would have to survive 41 years to make up the difference.

This assumes that the pension fund remains the same over the time in question. Even if it grew 6% in the year between him being 64 and 65, the resulting break-even period would be 12.2 years.

For a 60 year old woman in good health, a typical open market level annuity without a spouse’s income, guarantee or escalation, with a pension fund of £100,000 is currently £6,3231. The same annuity, if taken at 59, would typically be £6,228.1

So by delaying her annuity until 60, the woman would receive an extra £95 a year as long as she lived. However, she would have forfeited £6,228 by not taking her annuity at 59 and she would have to survive 65.5 years to make up the difference.

This assumes that the pension fund remains the same over the time in question, Even if it grew 6%, in the year between her being 59 and 60, the resulting break-even period would be 13.8 years.

Matt Ward, Principal Consultant for Wealth and Pensions Management at Defaqto said: “Choosing the right time to take your annuity is very specific to your individual circumstances and to your view on future annuity rates, even if your pension pot is protected by being in money or near money assets. So when you decide to take your annuity is just as important as getting the right annuity from the right provider at the right price.”

 

Average annuity £100,000 purchase price, level term, no escalation, no guarantee, no spouse’s pension

Average annuity £106,000 purchase price, level term, no escalation, no guarantee, no   spouse’s pension

Male

Female

Male

Female
Male Aged 64 / Female Aged 59

£7234

£6228

-

-
Male Aged 65 / Female Aged 60

£7410

£6323

£7829

£6679
Increase if annuity taken at 65 for male and 60 for female

£176

£95

£595

£451
How long it takes to replace lost annuity value if annuity taken at 65 for man and 60 for woman

41 years

65.6 years

12.2 years

13.8  years

            Source: Defaqto

Notes to editors.

1 Typical annuities are based on the average income of top five providers for the respective purchase price, as at 25 March 2008. Source: Defaqto’s RateTracker

For further information contact:

Defaqto Limited
Matt Ward, Chris Johnston or Luci Mylward
01844 295 454

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Advisers hold the key to platform success, says Defaqto

March 13, 2008 | posted by Luci Mylward in Investment, Pensions, Press Release | comments (0) |

Providers planning a long-term future in the adviser platform market will need to respond positively to IFAs’ requirements to achieve success, according to Defaqto’s latest report, ‘Adviser Platforms in the UK 20081- Stand and Deliver‘.  The report identifies key areas of focus for those wishing to deliver successful propositions within this ever-changing marketplace.The report suggests that despite experiencing some growth, the platform market is essentially still in its infancy. IFA networks and support groups, which have yet to take a stance on platforms or commit to preferred partners, will need to be the target of platform providers. These providers will need to cite the positive experiences of those who have bought into the concept of platform technology and are conducting business online.

In the report, Defaqto uses feedback from IFAs conducting business in the UK investment market to deliver a qualitative dimension to the findings. This includes an insight into IFA business habits, IFA opinion on pertinent industry issues and IFA perception of service standards within the platform arena. This gives important insights to providers by allowing  a better understanding of the IFA community’s behaviour and needs in this developing market.

Matt Ward, Defaqto’s Principal Consultant for Pensions & Wealth Management, comments: “It would appear from our research that many IFAs are still trialing platform solutions ahead of further commitment to one or two partners. One of the reasons for this would seem to be a confusion surrounding the USPs of each proposition and it is vitally important for providers to ensure that IFA supporters are clear about the capability of the services and systems on offer.

“Everyone who is involved in the market, whether as an active or potential participant, will benefit from understanding more fully how the market is moving and how propositions are developing, as well as finding out what the likely impact of regulatory directives on the platform market will be.”

-Ends-

Notes to Editors:

1The report ‘Adviser Platforms in the UK 20081- Stand and Deliver‘  is on sale priced £1,200 excluding VAT for a PDF version and £595 (No VAT payable) for a single printed copy. For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

 For further information contact:

Defaqto Limited 

Matt Ward, Chris Johnston or Luci Mylward

01844 295 454

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High profile group SIPPs - who’ll be choosing the funds?

March 7, 2008 | posted by Matthew Ward in Insight, Investment, Pensions | comments (0) |

News of the recent adoption of a Group SIPP proposition by one of the larger employers in the UK, GlaxoSmithKline, will have been music to the ears for providers of these money purchase pension solutions. We predict that this will spark more activity with regards to the inclusion of these schemes within employee benefit packages, especially as the decline in final salary schemes continues. Similarly providers buoyed by the appeal and success of individual SIPP products will be keen to ‘spread the love’ into the group market. 

Although Group SIPP is being touted by some to be the new heir to the throne in the group pension market we think that due to the array of investment solutions available it is more likely to suit the needs of a small percentage of the workforce such as key personnel and directors.  As such it may very well emerge as a successful top-up scheme solution which can be run in tandem with a Group Stakeholder or Group Personal pension scheme. 

The major decision point for the employer when appraising money purchase scheme options will be around getting access to manageable and sound investment propositions and hence this is where development focus in the market is likely to be. It is a well known fact that employees will often not want or be able to make a decision on which funds to utilise, especially where no advice or guidance is available, meaning that default funds are regularly used. Therefore the discussion around the number of funds or asset types available can often be a futile one.

As far as Group SIPPs are concerned if the employee struggled to select investment funds from a choice of 30 to 40 funds previously, how will they choose from a platform of over 1,000 funds? 

In light of these issues an interesting development which may occur, mirroring its success in the individual SIPP market, will be for providers to offer access to specialist Discretionary Fund Management links through the Group SIPP. This could provide a ‘win-win’ situation where the employer will be comforted by the fact that they are de-risking themselves from investment decision making, the employee will not be inclined to pick from a list of funds and the DFM will be able to professionally design and run large portfolios which can be linked to employee goal targeting and attitude to risk.

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Defaqto’s Star Ratings an Industry Success

February 29, 2008 | posted by Luci Mylward in Banking, Credit Cards, Current Accounts, Insight, Insurance, Investment, Pensions, Press Release, Protection | comments (0) |

Defaqto’s Star Ratings for 2008 have been more widely adopted by providers than ever before. The ratings, which have become the most authoritative and impartial guide to product quality available, cover products in the banking, protection, investment, pension and general insurance areasIn January Defaqto undertook the huge task of analysing the quality of just under 2,200 products in 24 separate product areas from 550 different suppliers. Defaqto used a set of quality criteria to assess each product in each particular area. From this analysis Defaqto was able to score each product and then assign it a Star Rating.  The ratings ranged from five stars down to one star.

In total Defaqto assigned 252 Five Star ratings, 360 Four Stars, 571 Three Stars, 498 Two Stars and 511 One Star.

Defaqto licenses companies to use the rating in their promotional material and so far this year, Defaqto has licensed the use of 140 Five Star Ratings.

Brian Brown, Head of Insight at Defaqto said: “A Five Star rating enables companies to demonstrate to consumers that their products have reached the highest tier of quality. The rating, with its associated logo, is becoming a well-known statement of product quality in the market as more and more companies adopt it into their marketing plans.

“With the ever-growing emphasis on product cost, product quality has been in danger of being excluded from the purchase decision. A Five Star Rating helps to address this imbalance by identifying for consumers products which have been independently assessed for quality.”

Main Star Rated Product Groups
Credit Cards Current Accounts Home Insurance Motor Insurance
Pet Insurance Travel Insurance Payment Protection SIPPs
Offshore Bonds Onshore Bonds Critical Illness Income Protection

-Ends

For further information contact:

Defaqto Limited
Brian Brown, Chris Johnston or Luci Mylward
01844 295 454

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Bank distribution tie-ups back on the menu

February 8, 2008 | posted by Matthew Ward in Banking, Insight, Investment, Pensions | comments (1) |

This week’s L&G and Nationwide announcement which confirmed a distribution tie-up for pensions, investment and protection products is sure to create a stir within the industry. From a pensions point of view this move represents the first banking and life office tie-up for a while and would seem like a very logical and shrewd progression for these companies with the way that the distribution market is moving.It also brings together two strong and trusted consumer brands. Both L&G and Nationwide figured in the top 20 most trusted companies as selected by consumers in research carried out by GfK NOP for Defaqto’s Retirement Savings & Income report 2007. Defaqto asked 1,000 consumers to state which companies, from a pre-defined list of financial services and retail brands, they would trust with their retirement savings. Nationwide and L&G figured prominently, ranking 4th and 16th respectively.In the proposed distribution landscape mapped out by the FSA’s Retail Distribution Review, high street banks in the UK would seem to be set fair for key involvement in providing consumers with affordable access to savings advice and products.

The L&G and Nationwide announcement signals an early example of major UK institutions paying heed to the future of the distribution market and Defaqto would expect to see similar new deals announced or existing relationships embellished in this area. 

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Defaqto announces new star rating procedure

February 1, 2008 | posted by Luci Mylward in Banking, Insight, Insurance, Investment, Pensions, Press Release, Protection | comments (0) |

Defaqto today announced the introduction of a new procedure for star rating personal financial products. Over the past seven years Defaqto has been producing star ratings for a wide range of financial products.  During this time, the process was based on products being scored for their quality against a set of product criteria using Defaqto’s unique Product DNA1 process which is built into the Aequos database. Depending on the scores achieved, products were located in one of five star categories, with Five Stars being the top rating and One Star the lowest rating.To get into the Five Star category, a product had to be scored within the top 10 per cent of all products. For Four Stars, products had to be the next 15 percent of products, for Three Stars in the next 25 percent and so on.

Star ratings for different product groups were produced over the course of a year for inclusion in the publication of the relevant Defaqto Insight market report.

During 2007 Defaqto underwent a review of its rating procedures and decided that in future it will produce all star ratings on the same day - 1st February - and that these ratings will apply for the 12 months to the end of the following January. As well as the revised schedule, the methodology for deciding on product ratings has been improved by Defaqto’s product experts, from being a relative comparison to becoming a set of absolute ‘bars’. As part of the new rating, Defaqto has stipulated that before a product can be rated as Five Stars it must provide some level of cover or benefit in a number of key areas.

These changes will give product providers distinct advantages over the current system:

  • Getting a Five Star product rating will no longer depend on how many other Five Star rated products exist.
  • Providers will know that if their products meet or exceed the top bar for quality, they will be rated Five Stars.
  •  Providers licensed to use Defaqto’s star rating logo will be able to use the logo more effectively, knowing it relates to the current year and the first month of the next year.
  • Providers can develop products over the course of a year knowing in advance the criteria used to score product quality and what the star rating boundaries are.

The research methodology together with the features and benefits used by Defaqto in calculating each product’s scores, as well as the boundaries for each star rating, are produced within the relevant Star Rating Report 20082 publication.

Commenting on the change, Brian Brown, Head of Insight at Defaqto said: “We  believe that these changes will bring greater certainty to providers both in terms of the development and marketing of their products as well as enhanced confidence in the star ratings themselves among consumers.”

                          

-Ends-

Notes to Editors

1 Product DNA - Product Data Numerical Analysis

2 Reports for the different product areas entitled ‘Star Rating Reports 2008′ are on sale priced £850 plus VAT each for a PDF version with discounts available for subsequent purchases . For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

For further information contact:

Defaqto Limited 

Brian Brown, Chris Johnston or Luci Mylward

01844 295 454

Star Rating Reports 2008

Number of Features or Benefit Criteria Scored

Features or Benefit  Criteria Essential for Five Star Rating
Home Insurance

 

 
Buildings

23

9
Contents

40

12
Motor

 

 
Comprehensive

44

8
Motorcycle

29

5
Travel

 

 
Annual Travel

29

12
Single Trip

27

12
Gap Year

29

8
Long Stay Travel

29

8
Payment Protection

 

 
Personal Loan PPI

24

7
Credit Card PPI

24

9
Mortgage PPI

24

7
Pet

 

 
Cat

24

5
Dog

26

6
Critical Illness

 

 
Stand Alone CIC

23

0
Level Term CIC

24

0
Decreasing Term CIC

24

0
Income Protection

 

 
Income Protection

16

0
Offshore Bonds

 

 
Guided Architecture

21

0
Portfolio Bonds

21

0
Onshore Bonds

 

 
UK Unit Linked Bonds

18

0
Sipps

Features, Benefits / Costs

Features, Benefits / Costs
SIPPs

19 / 8

0
  

 

 
Current Accounts

34 / 43

3 / 0

 

 
   Credit Cards

 

 
Credit Cards

19 / 27

0 / 1
Offset & Current Account  Mortgages

 

 
Offset & Current Account Mortgages

45  / 24

3 / 1
Equity Release

 

 
Lifetime Mortgages

53 / 27

1 / 1*

 1* - One cost feature the product must not have to achieve Five Star N.B. Where no essential criteria is listed this is because it is included in the standard criteria

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Don’t say you weren’t warned! The FSA lays it on the line

January 30, 2008 | posted by Brian Brown in Banking, Insight, Insurance, Investment, Pensions, Protection | comments (0) |

The FSA has today published its Financial Risks Outlook 2008 report (PDF Download), which sets out the FSA view on the UK financial markets, and where it sees potential risks.

Not only does this report provide an excellent summary of where the world economy and the UK within it appears to be at present, it also discusses the FSA’s priority risks for this year.

It’s not a light read - 70 pages of quite detailed content - but there is an extensive section titled “Industry Focus” which sets out the FSA’s thoughts on what it sees as risks in each financial area.  And some of it makes for quite worrying reading for those involved in financial services.

Leaving aside the massive problems with consumer lending the report also includes some pearls which should guide industry leaders in their future dealings with the FSA, and clearly states where the potholes are.  Non-subtle pointers include: (more…)

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