PIMFA Weekly News Bulletin - 7 December 2020

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PIMFA WEEKLY NEWS BULLETIN | 7 December 2020 Dear Nigel Welcome to the PIMFA Bulletin; grab a coffee and take 10 minutes to read this week's latest industry news impacting you and your firm.

LATEST NEWS

Brexit Negotiations

New Financial Report on post Brexit Capital Markets

The Brexit negotiations are continuing in London with little movement and the same

outstanding issues - level playing field, fisheries and dispute-settlement arrangements. According to reports, in the final phase of the talks the EU has given ground on some points and this has made several EU countries nervous. France is the most vocal in its worries about concessions, followed by Belgium, the Netherlands and Denmark. They insist that EU Chief Negotiator Michel Barnier should not cross the EU red lines just to agree a deal. The UK said on Friday that the EU has hardened its position on how competition rules will be policed and that this is making the prospect of a breakthrough more difficult.

The think tank New Financial has published a report which shows that postBrexit capital markets in the EU will be significantly smaller and less developed relative to GDP than they are today. EU capital markets will shrink by around a third overall, and in some sectors by more than 80%, and the current dominance of the UK will be replaced by an effective duopoly of France and Germany, who between them will account for 45% of all EU activity. The impact of Brexit on the size of capital markets in the EU will vary hugely between different sectors. In derivatives and foreign exchange trading, more than 80% of EU-wide activity is in the UK. Bond markets in the EU will be

A no-deal outcome of the talks would further complicate other issues that are separate from the negotiations, including the access to the EU Single Market for the UK financial services industry and the flow of data between the EU and UK. Now is the time for difficult concessions and political interventions in the talks. As long as discussions continue, the prospect of a deal is still possible.

around one fifth smaller, equity markets will shrink by around one quarter, while pensions assets and assets under management will shrink by nearly half.

The UK currently dominates EU banking and finance and is the largest market in the EU in 21 out of 28 sectors. This has given the UK an outsized influence in EU banking and finance: the UK will lose much of that influence, and the EU will lose much of the UK’s experience.

OECD Economic Outlook Report Brexit Preparedness for PIMFA Firms The UK economic recovery will be slower than that of other major economies,

The Brexit transition period ends in less

according to the Organisation for

than 30 days and PIMFA firms need to

Economic Co-operation and

make sure they have completed their

Development’s (OECD) latest economic

outlook report. By the end of this year, the

preparations for leaving the EU Single

UK economy will have contracted by

Market at 11pm on 31 December 2020.

11.2%. The OECD has downgraded its

For PIMFA firms, the situation regarding

forecasts for UK growth next year, to 4.2%

servicing clients in the EU is little affected

from 7.6% three months ago. In contrast,

by the developments in the UK – EU

the OECD predicts the global economy

negotiations. A deal and a no deal

overall will be back to pre-pandemic levels

outcome of the talks are the same as

by the end of 2021.

passporting will be lost at the end of the transition period and equivalence does not

There was an extra threat to growth in the

exist for the retail investments sector.

UK from the second wave of COVID-19 and Brexit. The OECD said it was

Firms must decide how to handle their

important that the UK and EU reach an

EU-based clients after Brexit - establishing

agreement as a deal was essential to

in the EU via a passporting subsidiary or

economic prosperity.

local office, merging with an EU-based firm, relinquishing clients and withdrawing from the market, or using the risky reverse

PIMFA in the Press

solicitation exemption from the establishment requirement. We do not

Investment Week: PIMFA: Treasury and FCA must review FSCS levy to protect sector and consumers Financial Adviser: ‘Bitter pill to swallow’: advisers react to FSCS interim levy Financial Adviser: Pimfa warns industry

advise the last option as it is not reliable and depends on the national regulators’ approaches in the EU Member States. We strongly advise firms to consult local regulators before deciding on the most suitable business model.

'tarnished' by phoenixing Financial Reporter: Trade association

Latest PIMFA Press Releases

calls for urgent FSCS reform Professional Adviser: FSCS funding again under the spotlight after supplementary

•

supervision & FSCS levy to

levy announcement

protect consumers & industry as it

International Adviser: UK lifeboat scheme

sets out a roadmap towards lower

seeks additional £92m Money Marketing: Pimfa chief: FCA must accelerate its FSCS intervention WealthNet: Soaring cost of PI poses problems for advisers

PIMFA calls for urgent reform of

FSCS bills •

PIMFA disappointed to learn of supplementary costs to be levied on members by FSCS

Citywire: What did YOU do when FCA

•

PIMFA sets out priorities for the

offered chance for FSCS reform?

future as it updates member

Professional Adviser: Advisers: FSCS

manifesto

levy roadmap 'workable'but regulator must

•

listen

PIMFA hosts first in series of masterclasses to encourage young women from all backgrounds to consider a career in finance

PIMFA Roadmap Towards Better Consumer Outcomes & Lower Levies

PIMFA's latest policy paper, 'A rising tide lifts all boats?: A roadmap towards better consumer outcomes and lower levies', was released last week in which we argue that without a wholesale review of the fundamental drivers of calls on the FSCS, the total compensation bill will continue to rise for all advisers and wealth managers, regardless of any review of the levy’s construction.

In the paper PIMFA identifies three-interconnected issues that ultimately lead to consumer harm and sets out a roadmap towards providing better consumer protection while also lowering levies by calling for the following: •

HM Treasury to review the drivers of FSCS levy costs and review the regulatory perimeter against this.

•

HM Treasury to review what allows firms to transfer risk onto the FSCS to cause market distortions including phoenixing and identify ways of legally limiting firms ability to transfer risk onto FSCS in future.

•

FCA to review its supervisory approach against risk assessment of firms adding cost to FSCS and report against this.

•

FSCS to review intelligence provision and provide an annual assessment of whether the FCA has acted upon it.

•

FCA to review levy construction and consider a risk-based element and how to boost recovery from the original firm or product.

Read the full paper here.

EVENTS & LEARNING

FEATURED LEARNING

PIMFA Training SM&CR Conduct Rules: Train the Trainer Programme 10 December 2020 Just a few places now remaining This training workshop and toolkit is ideal for firms that want to: • Feel confident you have delivered a high standard training course in line with the FCA’s requirements • Train all certified staff on the Conduct Rules by 31st March 2021 • Provide a refresher Conduct Rules training session for senior managers • Tailor their firms Conduct Rules training to specific staff job roles • Train an unlimited number of your staff on the Conduct Rules for a single, one off payment • Receive fully editable training course materials that can be personalised by you for your firm • Utilise the SM&CR resources that are used in over 30 banks and Building Societies For more info and to book your place, please click here.

FEATURED EVENT

PIMFA Online Conference Virtual Fest V2 27- 28 January 2021 Following on from the HUGE success of the inaugural PIMFA Virtual Fest in June 2020, we are proud to announce that bookings are now open for Virtual Fest V2. Taking place over two days (27 & 28 January 2021) the event will deliver presentations on key areas which members have identified as their key short- and long-term focus including: • Compliance • Risk and Resilience • ESG and Impact Investing • Cyber Resilience For more info and to book your place please click here.

View all other upcoming PIMFA Events and Learning here.

WHAT'S HAPPENING IN OUR INDUSTRY

Join PIMFA Plus partner Investor Meet Company at their webinar on 15th December to discuss the important topic of corporate governance. They will be joined by PIMFA Board member & Hawksmoor CEO, Sarah Soar; The Quoted Companies Alliance; The Financial Reporting Council; Wentworth Resources and Michael Woodford MBE.

FCA Publishes Evaluation of its Work on the Financial Advice Market

The FCA has published an evaluation of the impact of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR). The evaluation found evidence of some improvements in the market since the conclusion of FAMR: approximately 8% (4.1m) of all UK adults have received financial advice, an increase from 6% (3.1m) in 2017, adviser numbers are up from 35,000 in 2012 to 36,400 in 2019 (4% increase), the creation of the FCA’s Advice Unit has helped firms to develop new automated advice models, estimated assets under automated advice services increased from £0.4bn in 2016 to £3.2bn in 2019, consumer awareness of automated advice has increased, with 19% of consumers reporting having heard of these services (compared to 10% in 2017).

The evaluation also found that while more consumers are getting the support they need, further innovation could help even more consumers make better use of their finances. The FCA will supplement the evidence from this review with feedback to its Call for Input on Consumer Investments, which closes for consultation on 15 December 2020. PIMFA will

be submitting a response, if you are a member and would like to share your thoughts please contact us.

1 month to go: FCA Reminds Firms to be Ready for End of Transition Period

When the transition period ends at 11pm on 31 December, firms will need to be prepared for a number of changes to the regulatory environment in which they operate as EU laws will no longer apply and passporting will end.

To help firms prepare, the FCA has published extensive information on its website setting out the key issues firms need to focus on: •

Firms should be aware that the FCA is making use of the Temporary Transitional Power to provide them with more time to comply with a large number of the changes.

•

However, there are also key requirements that firms need to comply with by 1 January 2021

•

Passporting will end on 31 December 2020: firms that intend to carry on providing services currently covered by a passport will need to ensure they will be able to do so after the end of the transition period

The FCA has set out in detail considerations to help firms understand if or how they will be affected and what action they may need to take. The FCA Handbook has also been updated with changes to regulatory requirements that will apply to firms. The temporary permissions regime (TPR) will enable relevant firms and funds which passport into the UK to continue operating in the UK providing that they notify the FCA no later than 30 December.

If a firm currently relies on a passport to provide services to or from the UK, and proposes to cease those services at the end of the transition period, the FCA expects them to ensure the right outcomes for their customers, and provide timely communications to enable them to make appropriate decisions.

Latest PIMFA Consultation Response

PIMFA’s latest consultation response is to the FCA on the Liquidity Mismatch in Authorised Open-ended Property Funds.

Read this and all of our other PIMFA consultation papers here.

Find Out More.....

Bulletin is just one of the many insights and publications PIMFA produces on the latest industry news and issues - most of which are accessible to PIMFA members only.

If you have a query on how to become a member firm, the work we undertake or anything in Bulletin, please contact us at info@pimfa.co.uk.

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