Here's our weekly heads-up on the stories that may have caught your clients' attention over the weekend …
Our adviser drained our fund of trust
Another weekend, another uncomfortable headline for financial advisers in The Sunday Times. This article relates the story of Josephine and David Kelsall, a couple who had saved more than £1m, which they entrusted to Stevenage-based adviser Wagstaffs Wealth Management as they approached retirement.
When the couple became clients of the firm in 2011, they were initially told the performance of their savings would be measured against the FTSE 100 with dividends reinvested. In February 2013, the Kelsall's adviser - "quietly" as the article puts it - changed the benchmark to the FTSE 100 without dividends reinvested.
Clearly such a change would have the effect of making the portfolio appear as if it were performing better than it otherwise would and indeed, once the Kelsall's spotted the change, they spent two years making just that point to the Financial Ombudsman Service (FOS).
According to The Sunday Times, the ombudsman said: "I agree that [Wagstaffs] didn't act as it should. And that Mr and Mrs [Kelsall] were misled. The article also notes: "There is no suggestion the funds selected by the adviser were inappropriate or that the Kelsalls suffered any financial loss."
And it adds that Wagstaffs, which declined to comment on the story, "told the ombudsman the use of the index without dividends was ‘unfortunate' but that it ‘wasn't designed to mislead'." The couple - whom the FOS awarded £10,000, representing a refund on one year's advice and compensation "for distress and inconvenience" - told the paper they had lost faith in advisers and are now managing their own money again.
As we mentioned in this space at the start of the year, these kinds of stories tend to encourage more and it would appear The Sunday Times is gaining a taste for them …
Government set to launch reform of tax breaks for investors who back entrepreneurs
The government is set to build up the current tax-efficient investment space as a result of its ‘patient capital review' announced in the Spring Budget, according to this Mail on Sunday article.
It says the review is expected to start in May and will include a look at the current rules surrounding the Enterprise Investment Scheme (EIS), with any subsequent changes to the tax-efficient space announced in the Autumn Budget.
The Spring Budget said: "The review aims to ensure high-growth businesses can access the long-term capital they need to fund productivity-enhancing investment. Alongside identifying barriers to institutional investment in long-term finance, the review will also consider existing tax reliefs aimed at encouraging investment and entrepreneurship to make sure they are effective, well targeted and provide value for money."
Symvan Capital chief executive Kealan Doyle, "who has attended visits to the Treasury", is quoted as saying the government is keen to see funding funnelled into growth companies rather than property investments. He adds: "The market for a long time has been focusing on the wealth management community, which is primarily buying these products as an asset-backed play, but the Treasury wants it more for enterprise."
Save now for old age - or you won't be smiling
Another Sunday Times article hammers home the importance of saving into a private pension. The paper challenged 29-year-old Charlotte Coulbeck to live on the maximum state pension allowance - currently £155.65, increasing to £159.55 on 6 April - for two weeks.
Having been left with all of £8.63 at the end of the fortnight - even though the paper had allowed her to assume she had paid off her mortgage and was able to take advantage of discounted senior rates - the experiment has apparently convinced the young woman pension savings should be started as soon as possible.
Pensions minister Richard Harrington is quoted saying: "The state pension is an important starting point for retirement — covering the basic cost of living. But, if we want to continue to do the things we enjoy in retirement, most of us will need a private pension as well.
"When it comes to saving, my advice is - don't assume it's something you don't need to think about till nearer the time. Start young and, even if you can put in only a bit at first, it can all add up over time."
Coulbeck adds: "I completely sympathise with pensioners who say they are in poverty. For any meaningful type of life, you cannot rely on the state pension. It would be unrealistic to expect it will be enough to make a comfortable retirement."
Joining London team
Previously at Old Mutual Wealth
Will introduce a cap on cost of care
Inertia has become a key policy mechanism