Platform providers need transparency of proposition and charging structures, says Defaqto report.

April 7, 2008 | posted by Chloe Cottam in Insight, Investment, Press Release |

Despite assurances from market players about the transparency of their propositions, some IFAs claim that platforms are too expensive and that they still struggle to understand the concept, according to a report recently published by Defaqto.

The findings from the review of the adviser platform market coincide with the FSA’s feedback on its platform discussion paper. This highlighted concerns over the complexity, cost and training issues relating to the use of platforms.

Defaqto’s report, entitled: ‘Adviser Platforms in the UK 20081 - Stand and Deliver’, includes results from a study of IFAs conducting investment business. The study found that among the reasons given by IFAs for not adopting platforms were that there was not enough awareness of either their functions or of the available products.  Other reasons were that platforms required to be fully understood by clients before they would request them, while some IFAs simply thought that they were too expensive.

Matt Ward, Defaqto’s Principal Consultant for Pensions & Wealth Management, stated that: “Although it is acknowledged that platforms should be seen as a service it does not preclude providers from putting together marketing and support material which clearly defines the capability of a proposition and details the component parts. Clearly, more work needs to be done in getting the ‘platform’ message across to IFAs, and this needs to be followed up with ongoing support.”

Further, Ward comments: “Advisers also need to be in a position to compare and contrast propositions ahead of further adoption considerations for their practice and the fact that this process is not currently a straightforward one does not reflect well on the market.”       

-Ends-

 

Notes to Editors:

1The report ‘Adviser Platforms in the UK 2008- 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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Are Bank Base Rates becoming less relevant to the real economy?

April 7, 2008 | posted by Chris Johnston in Banking |

On Thursday 10th April, the Bank of England’s Monetary Committee will set the Bank Base rate against an extremely difficult economic background. The Committee is charged with ensuring monetary stability and of keeping inflation within 1% of the 2% annual target level.

The fault lines in the economy are likely to make this month’s decision as difficult as it has ever been. Inflation, by whatever measure, is likely to show a rise in March under pressure from fuel and some food price increases, while house prices look as if they are coming down while mortgage rates are going up.

The reluctance that banks are showing to lend to each other is reflected in the LIBOR rate, which for 3 months, is just over 6%, which is 0.75% above base rate, compared with a typical spread of 0.25% to 0.50% above base rate for much of the first half of 2007.

It looks as if financial institutions are making their decisions about lending rates and lending decisions in the light of their own particular circumstances and are not being influenced too much by what may happen to the Bank of England base rate.

In the current economic conditions, trying to manage the economy by moving interest rates is looking increasing like a measure that has passed its sell by date. A cut in the rate will encourage inflation but is unlikely to influence mortgage rates and keeping the rate the same will just prolong the current status quo. A rise in the rate will potentially choke off even more demand and make the outlook for growth and jobs that much more dismal.

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Are you covered for lost baggage?

April 4, 2008 | posted by Chloe Cottam in Insight, Insurance, Press Release |

With the chaos that has surrounded the opening of Heathrow’s Terminal 5, and the late Easter school holidays upon us, families are looking to take a break and the issue of baggage being lost or delayed is prominent.When travelling abroad, if your luggage is lost or delayed and you need to purchase items such as a change of clothes, hygiene products or any other necessary items, you would expect your insurance policy to reimburse you. Similarly, if your flight was delayed you would expect your insurance policy to provide some form of compensation for you being stuck in the airport lounge.

Defaqto has looked into the single trip travel insurance market to see what cover is provided for lost and delayed baggage as well as being delayed at an airport. The research noted:

  •  14% of single trip policies do not provide any cover for delayed baggage.
  •  40% of single trip policies only provide a maximum cover of £100 or less for delayed baggage.
  •  40% of single trip policies only provide a maximum cover of £100 or less for compensation for flights being delayed.
  •  74% of single trip policies provide £20 or less for the first 12 hours of being delayed at the airport.
  •  82% of single trip policies provide £20 or less for the each subsequent 12 hours of being delayed at the airport.

Mike Powell, Consultant for General Insurance at Defaqto, said:  “With the problems that have occurred with the opening of Terminal 5 and the fact that there has been widespread reports in the media of people not being able to collect their luggage and flights being cancelled or delayed, consumers do not always consider what cover is provided by their travel insurance policy for these types of eventualities. It is therefore important to check what is provided by a travel insurance policy before purchasing cover.”

-Ends-

 

For further information contact:

Defaqto Limited          

Insight person, Chris Johnston or Luci Mylward

01844 295 454

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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 |

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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Defaqto announces improved suitability letters in Aequos Engage

March 27, 2008 | posted by Chloe Cottam in Press Release |

Defaqto is pleased to announce that it has enhanced the suitability letters capability within Aequos Engage by incorporating ATEB Suitability (file:///C:/AppData/Local/Local%20Settings/Temporary%20Internet%20Files/Content.Outlook/UY25NUMZ/www.atebsuitability.co.uk), following a successful pilot scheme that was carried out towards the end of 2007.

ATEB Suitability is a bespoke version of Intelledox, the smart document creation software. Intelledox is partnered with ATEB Business Solutions Ltd, a specialist compliance consultancy with extensive industry experience that distributes Intelledox as part of its systematic approach to compliance, based on good business practice and risk management strategies. ATEB’s suitability report templates have proved extremely robust in compliance terms and used in conjunction with Intelledox, they virtually eliminate the possibility of error.

Commenting on the incorporation of ATEB Suitability into Defaqto Engage, ATEB Director Huw Reynolds’s said: “The industry has been crying out for this type of software for years. Existing report generators are all well and good, but there is too much reliance on user input and hence error rates are high. Intelledox virtually eliminates errors by forcing the user through a simple ‘wizard’ type interface. Letters are produced more quickly and the work can be delegated. The result is a quality end product every time. As suitability reports are an essential risk management tool, this software provides a significant advance.”

Alan F Kerr, Principal at Alan Kerr Financial Services said: ” When Defaqto asked me to take part in the pilot  scheme using ATEB Suitability within Aequos Engage I was sceptical about the claims being made for the Report Writer.  However, having used the system, I am thoroughly impressed by how professional the output is and how easy it is to use.”

Andrew Sotiriou, Adviser at Ethical Financial Planning said: “There are so many different suitability letter writing systems on the market, ATEB Suitability built into Aequos Engage is definitely the market leader. It is remarkably intuitive and makes the report highly personalised to the client and is so much quicker than anything else I have come across”.

Ian Osborne, Director at Granite Financial Management Limited said: “It’s good to see Defaqto listening to feedback from its customers and using this in its product development. The new functionality enhances the product and shows its commitment to supporting advisers through the research and sales process.”

Roger Perry, Adviser National Accounts Manager at Defaqto said:” This is a genuine enhancement to Defaqto Engage and I am truly excited by it because it will enable advisers to complete their suitability letter more quickly, more accurately and with complete confidence.”

-Ends-

For further information:

Defaqto Limited

Roger Perry, Chris Johnston or Luci Mylward

01844 295 454

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Thinking the unthinkable

March 25, 2008 | posted by Chris Johnston in Banking, Insight, Investment, Savings |

 With commentators now beginning to openly discuss the possibility of a collapse of another bank or financial institution, it is perhaps timely to consider what compensation  arrangements are in place for depositors and investors should this happen. For savers, there are only two homes for your money that are 100% safe and these are Northern Rock and National Savings and Investments as these are both owned by the government. For everything else, there are limits to the amount of compensation that is available. Compensation payments are managed under the Financial Services Compensation Scheme (FSCS),  and limits vary for deposits, investments. and insurance claims. Only institutions regulated by the FSA are eligible to be covered by the scheme, which only has £4bn per year to use for this purpose. Claims totalling in excess of £4bn would trigger meetings between the FCSC, the FSA and the Treasury to work out a solution.  As things stand currently, £35,000 of deposits per person per financial institution are covered and this doubles for accounts in joint names. For investment the figure is £48,000 with 100% for the first £30,000 and 90% for the remainder. But  the FSCS will only pay compensation up to the limit of £35,000 per person, per authorised institution. This means that a parent institution could be the authorised entity and depositors will only be eligible for one pay-out, even if they have other accounts in the parent’s subsidiaries.  So, it may be wise to spread your savings and investments across different authorised entities, but you will have to do your own research to find out who owns whom, which companies are authorised under a group registration and which are registered individually.

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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 |

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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Are you covered for lost baggage?

March 19, 2008 | posted by Chloe Cottam in Insight |

With the chaos that has surrounded the opening of Heathrow’s Terminal 5, and the late Easter school holidays upon us, families are looking to take a break and the issue of baggage being lost or delayed is prominent.When travelling abroad, if your luggage is lost or delayed and you need to purchase items such as a change of clothes, hygiene products or any other necessary items, you would expect your insurance policy to reimburse you. Similarly, if your flight was delayed you would expect your insurance policy to provide some form of compensation for you being stuck in the airport lounge.

Defaqto has looked into the single trip travel insurance market to see what cover is provided for lost and delayed baggage as well as being delayed at an airport. The research noted:

  •  14% of single trip policies do not provide any cover for delayed baggage.
  •  40% of single trip policies only provide a maximum cover of £100 or less for delayed baggage.
  •  40% of single trip policies only provide a maximum cover of £100 or less for compensation for flights being delayed.
  •  74% of single trip policies provide £20 or less for the first 12 hours of being delayed at the airport.
  •  82% of single trip policies provide £20 or less for the each subsequent 12 hours of being delayed at the airport.

Mike Powell, Consultant for General Insurance at Defaqto, said:  “With the problems that have occurred with the opening of Terminal 5 and the fact that there has been widespread reports in the media of people not being able to collect their luggage and flights being cancelled or delayed, consumers do not always consider what cover is provided by their travel insurance policy for these types of eventualities. It is therefore important to check what is provided by a travel insurance policy before purchasing cover.”

-Ends-

 

For further information contact:

Defaqto Limited          

Insight person, Chris Johnston or Luci Mylward

01844 295 454

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CGT: botched roll-out; laudable aims

March 18, 2008 | posted by Christopher Jones-Warner in Insight |

While a flat rate 18% tax on capital gains may be bad news for basic rate tax payers, it is likely to be good news for City private client investment operations and, in the longer run, for most investors as well. 

The Chancellor is regularly besieged by calls for the abolition of Capital Gains Tax on shares. It will never happen, though, for the intention of the tax is less to raise revenue than to stop investors protecting their total returns through capital appreciation. 

The tax has become highly complicated, however, tying up valuable resource in expertise, computer power and time while generating no real wealth for the nation. Many private client investment firms have invested heavily into systems that overcome these complexities to produce reliable reports and estimates of tax payable. 

Loading client details on to a tax system can be highly labour intensive particularly where a client has had a penchant for scrip dividends. The reports themselves are only as good as the information loaded into the system. The cost of administering these systems is borne, ultimately, by clients. 

So while abolition may not have been an option, simplifying the tax via a flat rate removes many of its disadvantages. Before we get to that happy state, however, firms will have to take their clients’ portfolios and un-index them: stripping back holdings to their base cost, ex-indexation and taper relief.  

With indexation, taper relief and pooling gone, calculation will be far simpler heralding a longer term reduction in costs, fees and angst.

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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 |

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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