Financial advisers have long depended on the expertise housed in life companies. Whether faced with an unusual client request or situation, technical support was just a phone call away. But that may not always be the case.
At the root of the reduction in the size of technical department at UK and international life companies is a commercial decision by management, that the benefits of a large technical team are outweighed by the costs of running it.
The traditional view has been that these teams brought in additional new business through providing assistance to advisers; who, in return, would show their gratitude by passing cases to that supporting life office.
That view is, perhaps, no longer widely tenable in the post-retail distribution review (RDR) world.
While adviser technical support could be seen as the provision of a non-monetary benefit and, therefore, breach the FCA’s “conflicts of interest” principle, the regulator’s Conduct of Business Sourcebook (Cobs) rules permit “acceptable minor non-monetary benefits”.
This would include “participation in conferences, seminars and other training events” and “information or documentation relating to a specific retail investment product or a service provided in the course of carrying on related designated investment business, that is generic in nature or personalised to reflect the circumstances of an individual client”.
Just as much demand
Of course, life companies still support advisers – but in a more direct and cost-effective way.
Technical teams, though in most cases reduced in size, continue to exist and are an essential element in life company structures.
Life offices wish to, and must, demonstrate technical expertise and there is an ongoing technical resource needed to produce and review website and other material and to communicate with advisers in other, more cost-effective ways.
Technical teams still need to analyse new legislation and provide commentary on this, both internally and externally. There are consultations to be considered – these days, few innovations or changes in the tax arena are introduced without lengthy and detailed consultation often involving the production of draft legislation.
How can advisers negate this loss of expertise?
Life offices and, to a limited extent, platform providers will continue to provide adviser support for the foreseeable future.
This will probably be in the form of webinars and the development of more sophisticated website material, such as tax liability and pension plans. Some providers offer more detailed analysis of technical issues in the form of policy papers or insights into specific topics.
Technical e-magazines will continue to flourish.
Some providers are investigating artificial intelligence applications – a possible development of the “robo-advice” concept. But it remains to be seen how useful these will be and when they will be available.
But self-sufficiency is also important; with advisers required, under RDR, to raise their knowledge levels to a Level 4 Diploma qualification, which is equivalent to the first year of a degree course.
Many have gone beyond the minimum requirement and progressed to chartered status. They have a very strong technical base, reinforced by the need to undertake continuing professional development (CPD).
Additional resources
HM Revenue & Customs’ manuals are also a valuable source of information.
The most helpful, from an adviser viewpoint, are the Pensions Tax Manual (PTM), the Insurance Policyholder Taxation Manual (IPTM) and the Inheritance Tax Manual (IHTM).
There is a wealth of material on the HMRC website – the trick is finding the relevant “bits”. Advisers will be aware that the HMRC website reflects its own viewpoint, which might conflict with other interpretations of the relevant law.
There are commercial providers of technical support, the best known being Technical Connection – part of the St. James’s Place group. These providers are often staffed by former life office employees.
Other professional advisers, accountants and solicitors can also provide technical support, advice and reassurance. Developing links with such professionals can be beneficial in terms of increased client confidence and might offer the possibility of future referral work.
The Society of Trust and Estate Practitioners (Step) is a professional association for those specialising in family inheritance and succession planning. Full membership involves examinations in trust, wills, executorship and taxation. There are many financial advisers who have gone down this path. However, there is a Step qualification specifically designed for the financial services industry.
The Step Certificate for Financial Services (Trusts and Estate Planning) is aimed, in particular, at investment advisers, financial planners and those working in the banking sector dealing with trusts and estates.
Of course, International Adviser will continue to publish technical articles – a valuable resource for the adviser.
The reduction in life office technical support will be a cause for some concern to advisers but sufficient alternatives are available.
Gerry Brown retired as technical manager – investment, investment taxation and financial planning at Prudential in October 2016. He was previously a technical manager at Scottish Life International and Aegon.
In addition to offering his expertise on a consultancy basis, Brown regularly writes about a number of tax-related issues.
