As the world struggles to come to terms with the Covid-19 crisis, Keith Richards outlines how the advice sector is stepping up for its clients
On the same day that we last went to press – 14 February – a 38-year-old man went to see his doctor in Codogno, a province in northern Italy. He was diagnosed with flu. He was later identified as the first known case of coronavirus in Lombardy. Just over a week later, Italy imposed a quarantine on 11 towns affected by Covid-19 and less than three weeks after the initial quarantine the whole of the country was in lockdown, followed quickly by almost all of western Europe.
The economic impact of the crisis in the UK has been unprecedented. The sharp fall in markets at the end of February was followed by a six-fold increase in the number of people claiming universal credit and almost a quarter of employees being placed on furlough. With the Bank of England predicting a fall in economic output of 14% for 2020, it is clear that uncertainty and disruption will be with us for some time to come.
In terms of personal finance, this leaves the UK with major challenges, including the way in which we manage retirement incomes. In the relatively benign markets following the introduction of pensions freedoms, we have seen many consumers become DIY investors, often without them having a very strong sense of what is happening with their money. The Financial Conduct Authority (FCA) has found that about a third of non-advised investors go into drawdown, but 60% of them do not have a clear idea of what kind of assets they hold. During this period of economic turbulence, many DIY investors will only be engaging with their drawdown portfolio seriously for the first time and they are very unlikely to make good decisions without professional advice.
It is at these moments that we really find out what is strong and valuable
To create as much capacity for high-quality financial advice as possible, we have been working closely with the FCA to reduce administrative burdens on firms.
The FCA’s response has been very positive. It has temporarily suspended the requirement for advisers to write to their clients repeatedly, whenever there is a 10% fall in their portfolio, provided the firm is providing more generic information to clients through its website. This will both reduce the amount of time that advisers have to spend duplicating news that their clients will already be hearing through many different channels and reduce the amount of consumer harm that will come from hearing only about markets falling, without any context or any news about markets recovering.
The FCA has also given guidance on client verification in a world of social distancing, saying that remote methods of verifying client identity, such as scanned documents, third-party corroboration (for example from an accountant or lawyer, or a ‘selfie’ or video provided by a client) are all acceptable forms of verification under its rules. The FCA has also pushed back the deadline for transfer specialists to achieve their qualifications, giving more time for people who are shielding or self-isolating to attain the new standards.
Protecting the sector
At the PFS, we have responded to the coronavirus crisis by changing the way we share information and insights with members. Newsletters are now delivered to members weekly, rather than monthly and we have made this issue of your Personal Finance Professional magazine digital-only. Furthermore, we are developing webinars and online continuing professional development to replace the conferences that would have been staged in normal times. These have included special sessions on the impact of the government’s measures for business and what the options are for advice firms. This will be crucial in protecting our sector and the critical role it plays for clients in future.
These have been worrying times for everyone – most of us know someone who has suffered from Covid-19; and we all know people whose livelihood has been affected by the crisis. It is at these moments that we really find out what is strong and valuable. I know that clients of professional financial advisers will be discovering, or rediscovering, the invaluable service that they receive, in the form of information, reassurance and sound advice from the most professional advice sector in the world.
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