Member update 20th January 2020 - part 2
Written on 22/01/2020

 Test question from Financial Exam in Bat

         Gains on non-qualifying offshore life assurance policies qualify for the personal savings allowance (PSA)?

      Answer: TRUE

Quote of the week


Cash-flow forecasting and Synaptics

Cash flow is a massive tool in the modern Financial Planner’s service proposition. 

Technology has been a big driver of this with cash-flow forecasting tools available which can be utilised in front of a client on mobile devices with various scenarios played out. 

You can’t do Defined Benefit Pension Transfer cases without cashflow planning to show suitability of the transfer and the ongoing sustainability of income for clients.   We can see it becoming mainstream for other pension products.

Cash-flow forecasts often provide different results and conclusions and the average client is almost certain to get “confuzzled” without guidance. 

FCA rules do not prescribe on cashflow forecasts.  

Advisers should ensure that the cash-flow forecast is explained clearly to the client, that conversation is well documented on the file and that the client is not faced with more charts, information and scenarios than is really going to help the client to make an informed decision. 

Use Synaptics!

Doing your self assessment return this week?

HMRC opened 300,762 investigations into self assessment tax returns, during 2019 for tax year 2016/17. 

HMRC also £1.2bn in extra tax from investigations into self-assessment tax returns in 2018/19.  Mistakes, whether deliberate or not, act as a red flag for HMRC which lead on to investigations and finally penalties.

Filing returns late can also attract HMRC’s attention.  

So just when you think 300,176 is a high figure, you discover that, au contraire, a total of 477,000 tax returns failed to meet the deadline last year - the football equivelent of forgetting to turn up to play.  

This alone lead to £47.7m of penalties being imposed!

The size of a penalty imposed through a tax investigation depends on whether HMRC believes the mistake was made deliberately or not.  

The penalty for a ‘deliberate’ mistake can be as much as 100% of the amount of tax in question whereas the penalty for ‘failure to take reasonable care’ is 30%.

HMRC imposed over 31,500 penalties for deliberate behaviour during the 2018/19 tax year.

FCA update on RDR and FAMR

The Financial Conduct Authority (FCA) has published a progress update on its evaluation of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR). 

FCA is in the process of reviewing their impact on the market to date and plans to publish its financial RDR/FAMR Review report later in 2020.  In the update, the FCA outlines the further progress made on its work since its last update in July 2019, which includes:

  • a survey, in August 2019, of a sample of approximately 400 firms which were asked to provide information on their advice services, including business models and strategies, target customers, charging structures, future plans, use of technology and any recent innovations.  The FCA is analysing the data it received from almost 300 firms and will use this and other data to inform its view of how services are developing to serve customers now and in the future
  • Commissioning qualitative research on how consumers interact with the market, to explore consumers’ views of their needs for support with financial issues, how they seek that support and their experiences. Together with the findings of another survey, ‘Financial Lives’, this research will inform the FCA’s view of the current state of the market and how it is developing from a consumer perspective

The update also points out that the review is part of a broad package of work on retail investments and the pensions and long-term savings sectors, and highlights some of the related work already underway.

Interestingly the FCA didn’t mention this in the regulatory newsletter sent out two days later, nor give any indication of Debbie Gupta’s bombshell featured below.  

FCA letter on their priorities for 2020

Debbie Gupta has sent her letter out to IFAs to inform you of her priorities in 2020.

Of particular note and not reported elsewhere, nor in the letter itself to retail firms

  1. Mortgage boom and the spectacular growth in second charge lending is not mentioned.  
  2. Life insurance sales not mentioned, and presumably these too are not a priority.
  3. DB transfers are red hot, and will remain so for those brave enough to undertake them.
  4. PII exemptions. The rule book and FCA policy have parted company.  As Debbie explains in this letter, even though the FCA rules may allow you to enhance capital in order to take PII with high excesses, she is not happy with this, and she wants firms with excluded business lines to cease work immediately on those activities.

“Some firms have excesses on claims which are at such a level as to render the cover materially ineffective. In those circumstances, we take the view the exclusion/excess or sub-limits unreasonably limit cover and do not comply with our rules.”

The key term therein is “we take the view”

We don’t advise you point out this divergence from the actual rules in IPRU-INV chapter 13 that lays out the options available to firms who cannot secure PII, As a general rule, don't phone the FCA unless you have something to tell them about your business – keep your nose clean and stay below the parapet, and get these communications checked by IFAC.


We have re-done the client agreements for 2020, to include the new Money Laundering rules that were introduced on January 10th 2020.

While all firms must be fully compliant with the new requirements on anti money laundering from 10 January, HMRC says it will take into account the short lead-in time businesses have had to implement all the new requirements in assessing the response to any non-compliance and it will assess each case on its own merits.

Please click here to download the new client agreement for IFAs (all types)

and click here for the new client agreement for all MGI firms. 

and click here for Letter of Engagement for all clients prior to doing a significant piece of work

all docs saved in BAT.

The key changes are the term:

We are registered under the Data Protection Act 2018 - is introduced, to replace any mention of the past or GDPR, which is now historical.


We are required to verify your identity in accordance with the Criminal Finances Act 2017 and the Sanctions and Money Laundering Act 2018.  

Again - previous rule references have been updated.

But the most critical change is for IFAs who use DFM firms.

Agent as client, or client as client - new client agreement. 

We have attached a new client agreement in the article above.  The new client agreement also allows customers to appoint the IFA as agent for client.  This is a very important issue for IFAs who recommend DFMs to understand.

Where there is a recommendation for a discretionary service, you may appoint us as your agent for the purposes of procuring and entering into an agreement for a Discretionary Investment Manager (“DIM”) to provide services to you, the Client. 

In the event of an unresolved dispute where we have acted as agent on your behalf, you will not have a right to refer the DIM to the Financial Ombudsman Service (FOS),

Model B - Agent as client, or client as client? - Different variations and terms of business changes required.

Appointing yourself as agent of the client to therefore appoint DFM to run IFA model portfolio, almost inevitably means you need to change your terms of business. See here the legal argument and background training required before appointing DFM to help your client.

Different variations of client DFM-IFA relationship.  Important reading click here for IFAs appointing DFMs.

What is important to note, is that if you want to free yourself from responsibility, you effectively have to give the client away, and undermine your own business, which will then devalue to nil.

So the alternative is to accept some liability, and you cannot have some without having all of it, so you need to move to become the professional client of the DFM as soon as possible.  

And to do that you need the authority from the client to act as agent.

Compliance Monitoring Programme

File description:

New 2020 Compliance Monitoring Programme for general use IFAs and MGI firms, where IFAC is auditing your work on a regular basis.

A rota of compliance requirement checks.

This is now saved in BAT

Investment SR reports have been updated.

See doc library

And also saved on

IFAC File Check appeal process

IFAC are noticing a significant increase in the number of file reviews being requested by firms across the board, which is a very positive sign, as it would seem that firm’s are realising the importance and the emphasis placed on third party external file reviews by the FCA.

It is also very pleasing to note that the file scores / gradings are continuing to improve overall, with many more high scores being achieved. 

Occasionally, it is possible that advisers / firms may disagree with feedback on a particular file or case. I must stress that our file checking team are here to provide feedback on cases as assessed by a third party. You are perfectly at liberty to agree and take on board the recommendations /actions etc, or, if you disagree, our recommendation would be to add a note to file explaining your reasons and if appropriate, why no action has been taken. 

It is not our general policy to consider appeals against gradings due to the suggested process above. However, should you truly feel that any grading is incorrect, please email with details of the case and specific queries in relation to the feedback. 

Please note however, in view of the time needed to conduct an appeal review, there will be a charge implemented of £50 plus VAT to cover the additional work.

Finally, please be aware that the result of any appeal review could be that the file score achieved is potentially worse than the initial grading. 

Any queries, please contact John Downs in the first instance. 

File check forms and guides

File description:

A complete list of file checking requirements, including checklists and actual file check forms, as used on BAT.

Includes all FCA mandated questions and checks. 

Covers Pension switch, pension, protection, mtge, investments, general.

It also includes guides to checking (4 pages word 1,000 words approx) on each category there are each of six pages and approx 1,000 words doc.

UPDATED Jan 2020 - all held on BAT and available here to download

Technical stuff from Funds Network

1.Paraplanning guide – a career path for paraplanners click here to download. 

2.Pension guide 113 pages “paraplanners retirement planning and pension toolkit. Not a very attractive title, but full of interesting facts that are not otherwise available on google through reliable sources. Click here to download

Brexit boom

More than 1,000 banks, insurers and other finance companies say they plan to open their first offices in the UK after Brexit to allow them to continue to serve clients in Britain, new data published on 20 January 2020 shows.

The Financial Conduct Authority (FCA) received a total of 1,441 applications between 2018 and 2019 from companies hoping to use its temporary permissions regime, which will allow companies to operate in Britain when the country leaves the bloc on 31 January 2020 while they seek full authorisation, regulatory consultancy Bovill said.

A thousand of those are planning to set up their first office in the UK, according to Bovill, which got the data from the FCA under a Freedom of Information request.

SIPP provider entitled to fees – even where the fund is worth nil.

Pensions Ombudsman Service POS has rejected a complaint that a Self-Invested Personal Pension (SIPP) was wrongly charging an annual fee of £800 on a fund value of £1.  (The fund was a distressed asset.)  The SIPP provider could, the POS found, refuse to close the SIPP as, among other things, closure could potentially prejudice any recovery by the Financial Services Compensation Scheme (FSCS). 

Furthermore, the level of fees was a commercial matter between the parties.   So the SIPP technically is now in negative value.   The SIPP had made a speculative property investment that became distressed but not insolvent.  The POS has now ruled that the SIPP provider was entitled to charge this.

Digital identity checks - Smart Search

For quite a while now, firms / advisers have been asking about the possibility of “Electronic Verification” for the purposes of money Laundering verification, including address, sanctions and Politically Exposed Person checks.

Historically, the biggest barrier to being able to assist in providing this type of verification has been the large upfront costs charged by providers, together with the necessity to “book” a set number of “checks / searches” per annum, which need to be paid for, regardless of whether they are used. 

IFAC are very pleased to announce a special deal with Smart Search, exclusive to IFAC members:

Discounted costs for IFAC Ltd clients:

Number of searches per Month
Smart Search Discounted rate for IFAC members in £3.182.952.912.852.752.74
Annual commitment in £1913546981,7103,3005,928

The above rates are for a simple one and done search where no Ongoing Monitoring is included. 

As part of the process, security information is provided on each search which allows the Adviser to “verify” who they are talking to by checking the relevant details, hence validating exactly “who they are talking to”. The level / amount of these questions would be at the discretion of the individual adviser, depending on answers received, any concerns etc. 

There are different pricing options available depending on the type of monitoring required, whether that be daily, weekly or monthly. The pricing is also dictated by the size of the package adopted, these are to be discussed on contact with SmartSearch.

The contract term has also been reduced from our standard 3 year term to a 1 year commitment and we have also removed the Licence Fee for IFAC Ltd members.

For anyone interested in taking advantage of the above, or wish to discuss further, please make contact via the details below, as this will ensure that you are allocated the specific IFAC deal should you decide to proceed. or call 01133 202 985.

All news