Pimfa Members Manifesto

The Personal Investment Management & Financial Advice Association

MEMBERS MANIFESTO Liz Field, CEO, February 2018

Building Personal Financial Futures

PIMFA MISSION 1 . D R I V E O U TC O MES TO IN CREASE T RUST AND CONF I DENCE I N TH E S EC TO R 2 . R E P R E S EN T TH E S EC TO R IN RECOMMENDI NG AND L EADI NG P O LI C Y AN D R EGU LATO RY T HI NK I NG 3 . F OST ER A C U LTU R E O F S AVI NG B Y HEL PI NG T O MAK E I T E A SI ER FO R C U S TO MER S T O RECEI VE I NVEST MENT AND OT HER P R OF E S S IO NAL ADV IC E 4 . P R OMO TE A P O S ITIV E IMAG E OF T HE SECT OR T O T HE PUB L I C A N D P O LIC YMAKER S ALIK E, SHOWCASI NG PI MFA MEMB ERS A S E XP ER IEN C ED AND TR UST ED F I NANCI AL SERVI CES P R OF E S S IO NALS W HO WORK WI T H CL I ENT S T O SECURE T HEI R F I N A NC IAL FU TU R ES

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THE PIMFA MEMBERS MANIFESTO

This cornerstone document sets out the PIMFA Member’s Manifesto. It also confirms our sector mission and approach to enable us to fulfil this Manifesto over the next five years.

Over the last year we have undergone dramatic internal evolution – from multiple new systems and upgrades to provide the infrastructure to deliver continued value and support to our members, to the hiring of new staff dedicated to the areas that are essential to our members.

To make sure we speak with the truly representative voice of the industry, we have used this time to meet with members all over the country, from each type of member firm from financial advisers and planners to wealth managers, execution-only service and private banks, and everything in between that PIMFA represents today. We have also developed our committee programme to cover over 32 committees and working groups – incorporating over 250 individuals and representing 120 firms.

This has been an essential stage of the change process as it has allowed our team to both meet to discuss and understand our member’s needs, while simultaneously giving them the first hand opportunity to share the priority areas and topics that are keeping them awake at night. Each of the six pillars summarises the areas of focus identified from this process.

Each pillar is discussed in detail, alongside the resulting calls to action, later on in this manifesto. They reflect the shifting landscape for our industry and all who work within it – from those giving assistance to individuals, families, charities, pension funds, trusts and companies - to stakeholders from HM Government, Regulators, Media and beyond.

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PIMFA MANIFESTO W H AT W E W I L L FOCUS ON 6 PILLARS

Enabling access to the sector – such as promoting the sector as a force for good, highlighting its importance in building personal financial futures; targeting policy that acts as an enabler

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Designing a sector for the future – including developing the postBrexit rulebook, future employees and skills, diversity and inclusion

Ensuring appropriate and proportionate regulation – this includes advocacy on the accumulation of regulation, costs, Financial Services Compensation Scheme (FSCS), Financial Advice Market Review (FAMR), Financial Ombudsman Service (FOS), General Data Protection Regulation (GDPR), Markets in Financial Instruments Directive (MiFID II) etc.

Developing robust and thriving markets – enabling retail investment in markets

Enabling digital business transformation – through a sector digital strategy

Enabling business protection – through data protection and cyber resilience

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Our Sector Covers:

◆◆ Wealth Management ◆◆ Financial Planning ◆◆ Financial Advice ◆◆ Personal Investment Management ◆◆ Private Banking

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◆◆ Insurance Companies Offering Advice ◆◆ Execution Only ◆◆ Advice and Execution ◆◆ Robo-Advice ◆◆ Platforms

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Vision for our sector in this environment - 2022 The sector will:

Be recognised by the public and Government as an integral part of the wider financial services industry and be reflected as such in the media

Be trusted as an essential component of an individual’s savings and investment strategy

Be digitally enabled to appeal to existing and future clients,

Be supported by proportionate and appropriate regulation and maintain its global status as the second biggest wealth management industry after the USA

protecting them and businesses alike

Operate in a thriving retail market, in which individuals will be able to save and invest with access to relevant products, services and professional advice to fulfil their own and their families’ financial objectives

Have access to skilled individuals to service client needs, growing businesses that serve society as a whole

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pimfa objective

To create the optimal operating environment for our member firms to deliver their services and meet clients needs

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Environment

Regulatory change and expectations

Demographic change and its impact on retirement investment and planning

Reputation of the sector - lack of trust

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Brexit uncertainty and opportunities

Markets at all time high

Government ambition to foster a savings culture whilst maintaining high levels of investor protection

Technological change

Need for talent and skills

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Enhancements needed to areas of market operations BUT need for sector now even greater in this environment

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Latest UK Wealth and Asset Statistics

U K W E A LT H M A N A G E M E N T S E C T O R S S H O W T H E F O L L O W I N G B R E A K D O W N O N T H E L A S T R E P O RT E D A N N U A L B A S I S : Sector

16.8% AUM equals £360.84Bn for the Top 10 asset managers in the UK.

Latest Wealth Management research shows firms AUM has now more than doubled in 5yrs, it now sits at £957Bn AUM. This represents a 15.9% increase from a year ago when it was £825.7Bn.

Also a 16.8% increase in number of client accounts

2015

2016

Private Banks

£248.7m

£265.5m

Investment Managers

£181.2m

£190.1m

Full Service Wealth Managers

£176.5m

£209.4m

XO Stockbrokers

£135.8m

£160.7m

Source: Compeer

£890,921m £756,205m

17.8% increase

3% 6%

UK AUM should get a boost

UK AUM grew by 14.6% in

EY ITEM believe UK AUM will reach

in April 2018 as Employers

2017, reaching £1.24 Trillion,

£1.5Tn by 2020. They still had some

have to boost contributions Revenues were up on the whole at over 6% over the year with client trades down slightly at just over 3%.

For the last yearly total the AUM for the UK and Crown dependencies had a 17.8% increase, year on year.

equivalent to 61% of GDP.

to Pensions.

reservations about UK financial services sector being impacted by political uncertainty and Brexit.

Source: Independent Treasury Economic Model/EY ITEM Club (an Economic forecasting group)

Source: PAM 2017

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Data correct as at May 2018

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10%

Switzerland is the leading country globally in terms of

wealth per adult, it has had a 130% increase to $537,600 since the turn of the century.

Financial Advisors pre-tax profits are now at

Global Wealth has grown by a significant

$16.7Trillion to $280Trillion (a 6.4% increase).

£699m. again down on the previous year as they were last year. These profits are down at just over 10% with Retail Investment Product Revenue

conversely up a massive 25% to £3.773Bn, from

A little more than half the UK adult population has wealth

£3Bn a year ago.

exceeding $100k and there are 2.2 million $ millionaires (representing 6.1% of $ millionaires globally).

UK Total Wealth is

26,311

$14.1 Trillion

26,311 is the number of current staff that can give advice

Source: FAMIN data - PIMFA and FCA

Source: Global Wealth Report by Credit Suisse (Nov 2017)

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UK Household Debt grew quickly as a multiple of income

from 1980 onwards, reaching a peak of 180% by 2008. This figure subsided but is now back at approximately 170%.

Source: Global Wealth Report by Credit Suisse (Nov 2017) Data correct as at May 2018

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Campaigning areas of focus

Enabling Access

The Future Sector

Supervision and Regulation

Robust and thriving Markets

Business Protection

Digital business transformation

◆◆

Highlighting the benefits of

◆◆

Emerging post-Brexit rulebook

◆◆

Accumulation of Regulation

Data protection including

◆◆

Digital Strategy

using the sector

Building Trust

Retail investment in markets

◆◆

◆◆

◆◆

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Costs of Regulation

cyber resilience

◆◆

Understanding consumer

◆◆

Improving Financial Education

Inter-generational wealth

Share owner democracy

◆◆

◆◆

◆◆

Financial Services

Internet standards and

view points

◆◆

Promote a culture of savings

Future Employees, Future Skills

Engaging the public

◆◆

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Compensation Scheme

security

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Innovation

and investment through

- skills foresight, careers,

Improving understanding of

◆◆

(FSCS)

targeted public policy activity

apprenticeships, T levels,

risk and listed products

◆◆

Financial Advice Market

diversity and inclusion

Review (FAMR)

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Financial crime including fraud

◆◆

Financial Ombudsman

prevention

Service (FOS)

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Our campaigning calls in each of these areas that follow reflect our role in representing the sector Our commitments in each of these areas that follow reflect the steps we take to foster the growth and reputation of the sector

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Enabling Access

Education

The benefits of using the sector

Our sector as a unique place and role for personal investors, charities, trusts and families

Financial education is not widespread. Understanding about saving and investing for the future must start at schools but we also need to ensure an increase in understanding of our sector in the media, Regulators and Government. Understanding about when to seek help is also vital to help individuals prepare and plan for the financial future

CALL TO ACTION We call for:

We commit to:

The Government to ensure the take up of financial services modules in curriculum to equip the young people with the knowledge to prepare for their financial future

Working with the industry to identify tangible evidence to explain what the sector is, its status as a regulated profession, what is advice for different types of clients, defining why it is valuable and why individuals should care

Individuals to be educated enough so as not to have to make financial decisions by themselves at the point when they most need it

We commit to: We commit to:

A campaign to promote the sector as a trusted partner in building personal financial futures for all savers and investors

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Educating Regulators, Government and the media to avoid confusing the public about the role of the sector and the need to save and invest

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Enabling Access

Promote a culture of savings and investment through targeted public policy activity

Effective and complimentary system of public financial guidance

Auto-enrolment is ultimately a policy in which success is determined by participation rather than adequacy. We should seek to embed a culture of savings and investment before making further changes to the pensions taxations system or to add further complexity

Financial guidance does not replace financial advice – each has its place

CALL TO ACTION

CALL TO ACTION

We call for:

We call for:

Government to increase minimum contribution levels over time and encourage participation in pension saving through retaining the current tax framework

The Government and Regulators to be realistic about the limits of guidance and ensure that a clear distinction between guidance and advice remains

We commit to:

We commit to: Work with the Single Finance Guidance Body (SFGB) to promote consumer engagement in saving and investing

Challenge Government to create and maintain a stable market in which consumers are afforded appropriate levels of protection in light of pensions freedoms

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The Future Sector

Emerging post Brexit rulebook

Building trust

This is vital in enabling our sector to respond to the future needs of clients

We have a unique focus amongst our peer trade associations. We have opportunities that must be leveraged on behalf of our member firms and their clients in an emerging post-Brexit era

We commit to:

CALL TO ACTION

Working with the industry to enable them to meet their regulatory obligations to provide good service to clients using a variety of mechanisms e.g. industry benchmarking, best practice guides, industry standards and codes of conduct

We call for: The needs of private savers and investors to heavily feature in Government negotiations for Brexit after transition.

We call for: Regulators to utilise our expertise to inform the emerging rulebook

Inter-generational wealth Our firms are at the centre of this environment

We commit to: Informing the legislative framework and an emerging rulebook to ensure there is not a one size fits all model and to guard against unintended consequences of rulebook changes

We commit to: Exploring challenges for industry and government policy to the transfer of wealth across the generations from the perspectives of millennials, the sandwich generation and third age

We commit to: Providing guidance to our firms through and into post-Brexit’ is another commitment

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The Future Sector

Future Employees, Future Skills This is a major concern for firms that requires collective action and leveraging/ signposting to existing good work, in order to highlight employer needs and opportunities for skilled individuals within the sector

Skills Foresight

Careers material and campaign

Apprenticeships and T levels

Diversity and inclusion

We commit to:

We commit to:

We commit to:

We commit to:

Working with the industry to identify the skills that will be needed for the future to inform educational policy

Working with the industry and professional institutes to gather careers information and creative careers material

Informing the content of T levels to accommodate the needs of our sector and working with all stakeholders to ensure apprenticeships are fit for purpose for employers

Promoting the Women in Finance charter and enhancing our Women in Wealth initiatives

We commit to:

We commit to:

We commit to:

Campaign to promote the sector to increase interest for future employees

Identifying the blockers for apprenticeships so firms can utilise the apprenticeship levy more effectively

Devising and supporting industry diversity and inclusion initiatives

Financial Crime This is an ever-present concern that needs continual action to combat

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We commit to:

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Working with the industry and stakeholders to continue to ensure an effective response to the evolving threat of financial crime. Continue to ensure an effective response to financial crime

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Supervision and regulation

There is an acceptance that proper regulation increases trust and the proper running of the sector. More can be done, however, to ensure appropriateness and proportionality for our firms and to remove the overlap of regulation amongst various regulatory authorities

CALL TO ACTION

CALL TO ACTION

Accumulation of Regulation

Costs of Regulation

We call for:

We call for:

The FCA to ensure the demands on firms when conducting thematics is minimised

More proportionate and cost effective regulation of the sector

We call for:

We call for:

The FCA to ensure there is greater monitoring across their organisation on the number of thematics and the impact on individual firms

Fit for purpose FCA reporting mechanisms and requests for information

We call for: The FCA to share the lessons of its regulatory start-up initiatives more widely so that all firms, who contribute financially to regulatory costs can benefit

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We commit to:

We commit to:

Closely monitoring regulatory output and to challenge unnecessary interventions and instances of regulatory over-reach

Gather annual regulatory cost data for the sector to highlight the impact on business

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Supervision and regulation

CALL TO ACTION Financial Services Compensation Scheme (FSCS)

We call for:

We commit to:

The Financial Conduct Authority (FCA) to ensure their supervisory approach mitigates against future claims on FOS

Promoting the FCA whistleblowing system to provide intelligence to the Regulator to minimise malpractice

CALL TO ACTION Financial Advice Market Review (FAMR)

We call for:

We commit to:

Consistent application of regulatory standards applying to advice services including established advisors, start-ups and automated services

Working with Financial Ombudsman Service (FOS)/ HM Treasury (HMT) to review trends in relation to long term advice in 2019

CALL TO ACTION Financial Ombudsman Service (FOS)

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Good Practice

We commit to:

We call for:: The FCA to share more information on good practice to drive up standards and provide clarity for firms

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Explore how decisions can be justiciable and therefore come under the oversight of the law

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Robust and Thriving markets

Retail Investment in Markets Our sector and individuals rely on robust and thriving markets to enable investment and savings

CALL TO ACTION We call for: A review of retail access to Initial Public Offerings (IPOs) and Secondary Markets, Peer-to-Peer (P2P) Crowdfunding, the Enterprise Investment Scheme (EIS) market and the Emerging Derivatives market

We call for:

A review of why the number of listed companies is declining, which impacts personal share ownership and investing for all

We call for: A review of the transparency of Alternative Investment Market (AIM) and the ability for them to be put into Self-Invested Personal Pensions (SIPP) scams, which impacts investors, AIM and the sector

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We commit to:

We commit to:

Encouraging and strengthening the role of retail investors in financial markets

Helping improve the understanding of risk reward

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Business Protection Data Protection including cyber resilience

Internet standards and security

Compliance with Regulations and benchmarking to protect businesses and clients are all vital

We commit to:

We commit to: Working with national authorities and sharing appropriate data with other trade associations to leverage good practice

Support firms in their pursuit of good practice in the management of cyber risk and data protection and to promote a cyber resilience culture in firms

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Digital Business Transformation

Digital Strategy Keeping up to date with technological advances, dealing with the scope of change and having fit for purpose regulation are essential for firms to deliver new solutions and services to clients

CALL TO ACTION We call for: Government and Regulators to create and maintain a regulatory and business environment that encourages and does not stifle creativity and innovation

We call for: Regulators to provide clarity of definition of innovation and a review of how to engage with their Sandbox and innovation hub such that existing industry members have clarity and a level playing field

We commit to: Supporting firms in their objective to transform their business by leveraging digital technologies through raising awareness of trends, opportunities and the impact on and applications for the sector

We commit to: Helping firms to explore and exploit FinTech as an enabler for profession and their clients

We commit to: Reviewing talent requirements in Science, Technology, Engineering, Mathematics (STEM) as part of skills foresight work

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ABOUT PIMFA The Personal Investment Management and Financial Advice Association (PIMFA) is the UK’s leading trade association for firms that provide investment management and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.

Our objective is to create the optimal operating environment for our member firms to deliver their services and meet client’s needs. PIMFA also leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the investment management and financial advice arena.

PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association going back for 27 years.

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22 City Road Finsbury Square London EC1Y 2AJ Tel: +44 (0) 20 7448 7100 Email PIMFA Members: enquiries@pimfa.co.uk Email Non-Members: info@pimfa.co.uk No responsibility for loss to any person acting or refraining from acting as a result of any material contained in this publication can be accepted by PIMFA, the author, publisher or printer.

Company limited by guarantee. Registered in England and Wales.

No 2991400. VAT registration 675 1363 26. Copyright PIMFA 2018.

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