A warm welcome to the AT8 Group blog - a regular commentary and expression of views on the industry and news collected from the team as they go about their business.
Whilst we are at the end of the August holiday period, I thought it a good idea for those of our readers who have not been around, just to list some of the AT8 articles and news that has hit the streets over the past month or so:
This newsletter highlights some of the industry e-commerce activities over the past few months.
We have started a new series of articles for Professional Adviser. They are covering what we describe as Practice Management Solutions, which is a term that covers all aspects of an adviser’s business, ranging from the front-office right through to the links to insurers’ administration systems.
We dabbled into the world of YouTube a few weeks back, and covered our very successful Sammedia sponsored Tech Round Table in a very brief video blog, in glorious 720p HD!
Anyway, it’s back to normal next week, with our unique insight on topics, trends and technology.
There has been a good deal of press coverage about the issue of VAT charges that relate to ‘advice’ and ‘intermediation/arrangement’ services provided by financial advisers. Various opinions have been put forward following the joint guidance issued by the ABI and HMR&C. Some of the opinions – as you would expect – have been quite emotional about the added cost to the consumer of the RDR ‘forcing fee based remuneration’… some emotional views have suggested that this is a new issue (it’s not) and some views have suggested that the decision to charge or not charge VAT can be ‘interpreted’ in a certain way to achieve a preferred outcome!
In a nutshell, it would seem that if the service is specifically intended to be for advice, then VAT is charged on the cost of the service, whereas if the service is for ‘intermediary services’ – arranging the purchase of a product – then the service does not attract a VAT charge. All pretty clear then [?]… However, if the charge made to the customer is not specifically separated for one or other type of service, then the question is whether it is ‘predominantly’ one or the other, and this ‘predominance’ will determine whether the VAT that will be charged, or not, on the WHOLE AMOUNT. Mmm, this is where ‘interpretation’ could come in! The problem with interpretation is that it is open to interpretation… especially in the eyes of the VAT inspectors’ teams and they will not necessarily be consistent in that interpretation!
So, some advisers may seek to charge a common unspecified fee on the basis that they can apply their view of what the predominant intent was and they may never have an issue. However, some will ‘play it safe’ and separate the services and charge VAT on the advice portion and no advice on the product ‘intermediation/arrangement’ portion.
There are some that will latch onto the potentially discriminatory increased cost bias being linked to an IFA’s ‘predominant service’ being advice, whereas the ‘predominant service’ for tied advisers – especially Bancassurers – may well be ‘product intermediation/arrangement’ (potentially lower cost). I don’t see this as a potential ‘conspiracy theory’ but I am sure some will.
A couple of diagrams extracted from the ABI/HMR&C guidance note are shown below. However, it is important not to rely only on these for your interpretation of how to handle the issues of VAT charging. There are supporting notes and more detailed explanations that has not been extracted. The document is not an onerous read – ten pages – so we would encourage all our readers to look at it to ensure that they understand the issues first hand.
AT8 have increasingly been looking at overseas practices to see what lessons can be learnt in the financial services market.
One clear market we can learn from is Australia. The Australian market is in many ways more advanced than ours. They have had superannuation for a number of years, forcing the general population to invest for retirement. This had led to substantial assets under management so it is not a surprise that platforms and wrap solutions came to market there before the UK. Many of the technology companies that drive the platforms in Australia have now brought their technology to the UK and are underpinning the UK platforms. FNZ for example now powers Elevate and Standard Life’s Wraps while GBST (formally Infocomp) powers Macquarie and Novia.
In our work in the UK we have spent considerable time looking at how the Platforms should integrate to the Practice management systems in the UK. One Australian Professional, now operating in the UK, told me that it was the Practice Management Systems with a focus on the Front Office, providing ATR, Cashflow Planning tools, Asset Allocation tools that had thrived in Australia ‘Post Wrap’ while those focused on more traditional Back office functions like contract enquiry and commission reconciliation have suffered.
Another trend we picked up from a systems house in Australia and that perhaps we can learn from, is that the Wraps have largely been through the phase of trying to provide the whole suite of IT tools to the distributor and moved back to their core business of fund administration. The CRM and Sales tools moving very much off platform and back to the practice management systems.
Our focus hasn’t just been on Australia. We have been taking a look at Financial Planning tools in Northern Europe. In particular we have looked at Ortec who provide portfolio creation and monitoring software, using complex financial models to help match asset allocation to ATR and to review whether the investment strategies stay in line with the client’s goals. Their approach appears differentiated to the UK systems and if anyone would like more information then we would be happy to provide an introduction.
We mustn’t forget the US. A few of the leading US financial planning tools have been anglicised and are now operating in the UK. Planlabs has been available in the UK through BMC for a while now and last year Voyant launched in the UK and is gaining good market traction already. Voyant has a Web 2.0 approach with a strong Business to Consumer function that can work in collaboration with the IFA solution.
Looking overseas of course isn’t an exact science, their market drivers are different and systems will evolve with different prioritises, but it can give us a useful insight into some of the trends that may occur in the UK in the near future and besides that it is fascinating and fun.
