August 2010

The vast majority (85%) of financial advisers believe that client segmentation is going to increase in importance over the next two to three years but only 27% of advisers are currently segmenting their client bank based on the needs or preferences of their clients.

Financial advice will be cheaper if people pay for it all up front, rather than over the life of the product being purchased, according to a VAT Guidance Note issued by the ABI on Friday. If investors do not want to pay for financial advice up front, future ongoing payments will be subject to VAT and hence will cost 20% more (or 17.5% more for advisory services supplied prior to the date of the VAT rate rise on 4 January 2011). These rules apply now but will become a major issue when the Retail Distribution Review is implemented and commission is eradicated.

Skandia UK today announces growth in net client cash flows of 225% to £1.3 billion in the first half of 2010, compared to the same period in 2009. This has led to an increase in funds under management of 3.5% to £29.2 billion as at 30th June 2010 compared to end December 2009.

The current rules surrounding income drawdown should be simplified to lessen the administration burden on financial advisers and simplify income calculations for consumers. These changes should be considered as part of the current consultations on the effective requirement to buy an annuity at age 75 and the restriction of pension tax relief.