Like many of us, are you feeling inspired after the Chancellor’s Mansion House speech, with a greater sense of optimism? Or is it more akin to a feeling of ‘haven’t we been here before?’. Importantly, the Chancellor was quoted stating “regulate for growth, not just for risk” however this is counter to many other polices she has put in place.
Here at Simplify Consulting, we have been mulling over some of the key headlines and what this could mean for the Wealth, Insurance and Asset Management industry over the coming years.
Pensions Schemes Bill & Asset Allocation
We are supportive of the sentiment behind ‘megafunds’ and how this will drive investment growth back into the UK. What this will actually mean in reality and the adoption by investors time will tell. We are behind and endorse the voluntary Mansion House Accord minimum 10% DC pension funds by 2030, with 5% of this being allocated in the UK.
However, is the market ready or will it simply come down to more stick than carrot? It’s unclear the consequences if the market doesn’t hit the £50bn target by 2030. There is a risk the market passively adopts and we come no close to this. After all we are all used to keeping an eye on the next Chancellor waiting in the wings – potentially the market could take the same view and simply wait for another policy change
ETFs, Managed Portfolios, and Default Funds for example continue to be put into question whether they are providing fair value for the consumer. It’s unclear how forcing further UK investment into DC funds can help drive this in the right way. Coupled with the ever increasing concern on the general future of Master Trusts, we are in for an interesting few years.
Shift In Deregulation:
Oh no here we go again! Interesting reference by the Chancellor describing the regulatory environment as “boot on the neck” of the industry. As an industry we have sadly had to navigate through the inherent regulatory complexity. Will this time round be any better? (deep breath!)
SM&CR has resulted in an administration headache (quick we best relax the rules then). SM&CR has principally driven the right behaviours, but in reality the regulators have struggled to keep pace. We welcome the loosening of regulation if it doesn’t result in a worsen position for the consumer. Oversight by senior managers by now day to day should be as a matter of course with the right regulator framework to maintain standards. Rather than a relaxed approach, it appears a swing back to principle led regulation is needed. Nikhil Rathi is too now grappling with how far to go. Good to see the FCA and UK Government [not] joined up.
The spot light on the FOS was an interesting take. Specifically calling out the need for reform. Better outcome management is a positive step for the industry. There is considerable time and resource invested by firms to manage the inconsistency of FOS decision making. We welcome this and look forward to how this can help firms improve their operational processes as a result. Reduction in interest rate payments more aligned to baserate. I mean come on, 8% was ridiculous in the current climate anyway. We applaud the Chancellor for implementing common sense.
A rather brief reference to Consumer Duty. Again we applaud the Chancellor. We are pleased this wasn’t forgotten, given the significant investments firms have had to make to strengthen their controls and frameworks. We wll be keeping a close eye on the how the thinking matures.
Retail Investments:
It’s interesting having spent a year telling the nation that the definition of working people are those that don’t invest and you now want everyone to move their cash from their ISA into an Stocks & Shares ISA. Or to put it another way, the Chancellor wants the government to now unlock the ~£300bn held in cash ISAs?!
Captive Insurance:
We are supportive of this and is a positive step for further investment into the UK, given how insurers use Guernsey, Bermuda or Luxembourg as a vehicle today. The regulatory framework will need refinement and a relaxation if this is to be successful.
Dan Martin
Lead Consultant
