Super Banks, Super IFAs, now…Super Mutuals!

The PFS-Personal Finance Society, are helping Advisers revise for the CII Diploma Exams, through a series of study sessions. Aegon Scottish Equitable are behind it all as the sponsor. Apparently the percentage of members that have completed the Diploma exams has increased by 30%. These study groups will be held in Leeds, Bristol & Birmingham in March so get yourselves booked in.

IFAs, in my opinion, are given a lot of support on the technical side, with these initiatives,& it could be a great time for Aegon Scott Eq to promote their Life, Investment & Protection products (I’m so sceptical). More importantly, it could be a great forum for IFAs to discuss their experiences during the recession, and share ideas of how different firms are dealing with issues! A problem halved etc….

A bit of a sad story really, the FSA has stated that by the end of Q3 2008, 340,000 Mortgages were in arrears. It was discovered that lending peaked in Q3, 2007, but declining dramatically since then.

This, for me, is the key to recovery, if the Mortgage sector was to come back, construction would follow. But, this is looking further away than expected, and despite billions of pounds from the Government, the banks aren’t even lending to each other, and hence, have been accused of taking legal action straight away, on people who briefly slip into arrears! I think, if efforts again, to get the banks lending, not just in the mortgage market, but to businesses and individuals alike, we will be at risk of a “second depression”.

The recent trend of, what I would term “uber companies” has continued this week, with the rumours of CFS-Co-operative Financial Services & Britannia Building Society, coming to fruition! The merger between the two is likely to create a “super mutual”. This new giant, will compete with government and shareholder owned banking organisations. Through, Economies of Scale, an overall calculated saving of this combined organisation of £60,000,000 will be passed onto customers, through “competitive rates and improved customer service”. They are likely to create a single brand, but this will take up to 3 years, and still has to be passed by the shareholders later this ye

This is a constant trend! I’m surprised, if I don’t read about some type of merger or acquisition in either, the IFA, Bank or Building Society sectors each week. I know that Britannia’s x-tie Axa have moved onto distributing its products through National Australia Group, NAG amongst others. I suppose it’s nice to have a chair to sit on when the music stops.

Onto the Macro picture, last week, the Office for National Statistics displayed that the Uk Economy shrunk by 1.5% in the final quarter of 2008, having an immediate impact on the FTSE, pushing it beneath 4,000 points, to 3,968 by mid-morning on Friday. RBS, Lloyds & Barclays lead the retreat, falling between 3-13% by 10.30am in the morning.

This follows on from what I saying earlier, it’s a vicious circle, the banks are being over-cautious about their lending, which adds to lack of confidence in the whole sector. All it needs is one big snippet of news, and the bank’s share price suffers exponentially. Someone, somewhere has got to start lending to someone, and try and break this cycle. The alternative is, the Government nationalising the whole banking sector, building on their stakes in Northern Rock, B&B, & 70% of RBS!

I tried to pick a positive note to end with, but I don’t think that the grey, rainy weather is the only grim picture in the UK this week. So, I’m afraid it’s negative again! The National Association of Pensions Funds stated that 52% of defined benefit Pension Schemes, (that are still taking on new members), could shut down due to the Recession and Banking crisis. Latest surveys by the NAPF, suggest that around 1,000 Pension Schemes are in trouble.

Basically, employers, in such a down turn will look at areas where they can make savings & 60th, 80th & 30th (if they still exist) are good place to start in their eyes. This has been happening for over a decade now, and the days of employers paying out 40/60th of people’s final salary at retirement are long gone. Oh to work in the Public Sector!

Towergate moves to double figures in its acquisitions!

Legal & General, according to Money Marketing, have announced a re-structure of its IFA Wealth support team, which will result in the team being reduced by nearly a third. The team which comprises of both technical support, but also IFA Business Development Managers, will lose approx 35 people out of 121. A spokesman from L&G stated that this re-structure reflects market changes.

I think this won’t be the only issue with L&G; they have a professional, driven sales force, in my opinion, but will be running out of branch networks for them to operate out of, starting with Northern Rock, and now with Bradford & Bingley. They still have distribution channels through Alliance & Leicester, but this will be under threat with the Abbey Santander situation. Maybe driving their product range to a smaller, but more streamlined IFA market maybe a credible option, but not with a reduced sales force. However, I do understand that Life Offices have to make “jam today” also, and there are less IFAs out there, due to RDR etc, for Life Office BDM’s to sell to. An impossible quandary for some!

Talking of Santander earlier, their Asset Management arm has launched a series of growth & income portfolios, as part of a new promotion of Investment fund with more “mass market” appeal! The logic is that, with these products available through Abbey branches, with no upfront costs, these may appeal to a changing Bancassurance market, who are more concerned with Income returns, than before!

I’m fascinated to see how the Abbey Santander group, accommodate, merge & combine, all their equally distinctive brands, with Bradford & Bingley & Alliance & Leicester being part of the collective. I’m been wracking my brains to come up with an acronym that might fit. Do email in ideas…..maybe….ABAS Banking Group. Don’t worry, I will patent it!

A big promotion for Bryan Innes at Towry Law. They’ve promoted him to Senior Client Partner, which is reserved only for the very pinnacle of their Wealth team. Apparently, he’s been instrumental in building relationships with the Oil and Gas industry in Scotland. Well done Mr Innes!

It’s good to hear positive stories in the IFA market, and I think, National and Regional IFAs should reward those individual that don’t sit on their hands and moan about the “credit crunch”, but those who build relationships, even in bad times, and are well placed when the good times come back.

The FSA have announced that Trainee IFAs will be allowed to give advice to clients, whilst still studying for QCA level 4 Qualification, if supervised by their manager. Basically, these new benchmark Qualifications for Trainees to take before they are ready to advise across the board, will be a huge Investment for IFAs before they see any economic return from the new Industry entrant.

I believe this is a very practical approach from the FSA, realising that IFAs have to reach for new goals in terms of TCF, RDR, new qualifications, but in the meantime, they have be economically viable, and keep turnover ticking along, in order to survive.

Finally, Towergate, made the headlines in 2008, with their aggressive growth plan, but don’t think they’ve taken a rest in 2009. They’ve recently announced their tenth acquisition with its takeover of IFA & GI Brokerage Smith Blamires. This will bring their total adviser number to 100 & Financial Chief Exec, Ian Darby stated that they will continue to add high quality businesses to their group, but that they can offer IT support & a leading brand to these acquisitions!

To finish on, these Mergers & Acquisitions are a result of not just the down-turn or recession. I think the industry itself, is changing to a more streamlined, fee based approach with a higher standard of education for IFAs, and smaller firms have realised that aligning themselves with the right type of larger firm will give them a more prosperous future.

The Post Office as a State Bank?

So, into the second week of 2009, a busy week for the government with reports of “money printing” from treasury sources, and interest rates and libor rates down to record lows. Personally, when we talk about expanding the money supply, the government are more likely to do this through adding liquidity with government backed iou’s to kick start the banking sector and get them lending to each other, not old fashion money printing, I hope!

I think this is the key, because if banks aren’t lending to each other or the public, it doesn’t matter what rates are set. Later we’ll have a look at a report of a possible state bank candidate.

John Charcol Directors have been in the Industry news this week, as Money Marketing revealed that in 2008, they were forced, through pure survival to place £2.1 million into their firm, along with having to underwrite £1.3 million rights issue, along with a juicy £1.2 million debenture to make sure they met FSA capital standards for last year. Three directors, Jon Moulton, Charles Wishart & John Garfield had put together £1.5million to pump into the organisation in 2007!

All these re-financing issues coupled with Charcol, re-tying themselves to L&G on the product side for Life & Protections, should place them in a strong position when the good times come roaring back, hopefully later this year. Maybe a chance for them to repay all the Investment in themselves. They obviously have faith in how they go about servicing their clients. I’ve been in F/S Recruitment for nearly a decade now, and I remember the glory years of John Charcol, where they held a big portion of the market, maybe those days will return! Good luck to them!

So what have the IFAs been up to in this 2nd week of 2009? Well, 2plan, National IFA Brokerage, have appointed Julie Darlington and Standard Life’s Paul Mcnamara onto its board of Directors. Their Management Chief Exec officer, Chris Smallwood stated that these appointments are part of their strategy to build for the future, and have a specialist in each area at the top of their organisation : Julie from a compliance, supervisory and paraplanning background, and Paul’s overall extensive industry knowledge and actuarial background are both bringing something to the board.

Personally, one of the positive things that medium sized and National IFAs are doing is to think long and hard about who the right calibre of people are going to be to get them through the bad times, but also be there to take advantage of the good times!

Still in IFA land, SimplyBiz advisers through its “New Model Business Academy” are, according to a survey of their members, are looking to sit over 2,400 CII exams in 2009. What about the rain forests, although, it’s all automated these days!

Joking aside, this is very impressive, as on top of this stat, nearly a quarter of Simplybiz members are at least Diploma level and /or above, of which 250 of these members are qualified to Chartered or Advanced Diploma level. I think IFAs, generally, should pat themselves on the back. Since writing this blog each week, I’ve found that on average, they’ve reacted to the recession, by becoming more pro-active, giving better quality of advice, offering a wider range of Investment and F/S products, and finally, they’ve educated themselves to higher levels, and many will hit and exceed FSA targets for 2010 and beyond. Well played to them!

Interesting article in Money Marketing, Treasury Committee MP, John McFall, has made calls on the Government to think about making the Post Office into a state bank to help kick-start the Economy and deliver lending targets! Furthermore, Mr McFall, stated that most Banks naturally are being too cautious with lending to different parts of the Economy, but that this will limit the revival, and cause a second depression! The Post Office, he believes could be a perfect vehicle to turn into a National Bank to offer a more aggressive lending policy!

It’s a “vicious circle” in these times, the Banks, were decimated in 2008, so have gone back to a more cautious lending and mortgage strategy, despite the government lowering interest rates to 1.5%, the lowest in recent History, and rumours of a expansion of the “liquidity” supply to the banking system. This cautious lending strategy filters back into the economy with individuals and businesses not being able to get access to credit to expand through the down turn, and hence a second “credit crunch” occurs. At least, with a state bank, they would have a different lending agenda, and hopefully, as people came out of the recession and the good times came back, they wouldn’t renege on their loans and the recovery is aided. Food for thought!

IFA’s must increase marketing to survive 2009!

Happy New Year everyone! So what happened in the last week of 2008, moving into 2009? According to Money Marketing, the Halifax has urged Brits to fund there Pension schemes properly, or even start paying into a Pension of some sort, as a New Year resolution! Apparently, their research suggests that over half the population of the UK, don’t pay into a Pension at all, and that around 70% of people surveyed overestimate the value of state pension provision.

I think this is a crucial issue for us, getting more vital year on year. Firstly, were generally living longer, and hence the working population in relation to the retired populous is getting smaller, and hence personal retirement provision is key! I think IFAs, Bank based Financial Planners, and such like have been armed with this survey and others to go out there and preach the good word of Personal responsibility for retirement. It also makes me personally want to ring my IFA and update my Financial Planning!

So what’s been happening in Regulation Land? The FSA are hosting a “treating customers fairly” seminar in Norwich on the Jan 21st, for small IFAs and Compliance people, to focus on preparation for TCF assessments later in the year! These are designed to aid the small IFA firm to consider the needs of the client at each stage of the sales process and effectively getting them to take ownership of this process!

If the standards of advice in Financial Services is going to be top notch in 2009, firms, IFAs, regional practices need to know exactly what is to be expected of them by the regulator, and if these types of seminars will help this process, then I think it’s a step in the right direction.

Interesting article from moneymarketing.com, apparently IFA Life stated that for IFAs to survive and prosper in 2009, their marketing projects and activities will be crucial! IFA Life founder, Philip Calvert stated that some IFAs are suffering from complacency and relying on Income/Renewal streams, and need to be more forward thinking in terms of marketing to get new business or income on board!

Couldn’t agree more, in researching the IFA market place to write this blog, each week, I’m learning that the real IFA winners of 2009, will not simply rely on existing Income streams, but be pro-active, through whatever mediums, marketing shots, seminars & presentations to clients and professional introducers alike, as business volumes have fallen and if you stand still, you’ll lose!

Better news for IFAs in the New Year, David Golder, MD of Bankhall’s IFA Services, has stated that clients who lack trust in Financial Institutions, such as Banks/Building Societies, may push them towards seeking advice from IFAs!

Personally, I believe, weve seen a year which is unpresidented in the UK Financial System, names like HBOS, RBS, Bradford & Bingley,not to mention the Investment Banks, all in trouble at some stage in year, to the point of Nationalisation (or part there of). Couple this with people becoming more sophisticated in their Financial Planning or more informed, I think IFAs, if they are ore pro-active in winning new business, can take advantage of this shift in emphasis! Good Luck all you IFAs in 2009!

Finally, onto the mortgage market, according to the Land Registry data, the stats show that house prices dropped 12.2% in November 08, compared with November 07, with the average house price being £161,883 (quite near to 2006 levels)!

Obviously, weve seen prices fall in the Mortgage market place, but Im confident that by the 2nd quarter of 2009, due to Libor rates being extremely low, following record Base Rate cuts in 08, more extensive mortgage products will return to market, and that pro-active Mortgage Brokers and Mortgage IFAs, will take advantage of rising business volumes by offering a wider range of Mortgage and re-mortgage vehicles!