We operate in a heavily regulated marketplace and that is why we are becoming an increasingly rare commodity. As much as firms like ours strut about declaring our “Independence” and the fact that “We are different”, we are in effect forced to work in a certain way by two drivers. And unfortunately neither of those drivers is the client! The first driver unsurprisingly is the Financial Services Authority (FSA) and the second is Her Majesties Revenue and Customs (HMRC).
The Financial Services Authority (soon to be Financial Conduct Authority) has it’s rulebook – sorry Handbook. If you would like to take a look here it is. Some say that if you printed it out it would be over one metre thick. As if that isn’t enough they now operate a “Principles Based Approach”, which extends well beyond any rules. Like a game of Monopoly, if you break the rules or principles you will not pass Go and you won’t collect £200 and you could Go To Jail. We like many quality firms strictly adhere to their rules.
Commission is banned from the beginning of 2013 and about time too. We have been a fee only business since 2005 so for us it will be business as usual. HMRC says that fees incur VAT in most cases whereas commissions are VAT free. Check your accountancy fees or your solicitors fees if you need any proof that VAT needs to be charged. Financial Advice is VAT-able but Financial Intermediation isn’t. We are predominately Financial Intermediators {{1}} and always have been. Get it wrong and we have to charge our clients VAT. It won’t benefit you either as a client, as in most cases you can’t claim the VAT back. If you are really interested in the rules then have a look here.
So you can see, if we don’t follow the rules of the FSA they will close down our business. If we don’t work within the VAT rules created by HMRC, we would have to add VAT to our fees. So in truth our business will look much like many other businesses from 2013. Every business will describe their multi-stage Financial Planning process, designed with you in mind, but let’s be honest we are doing it because we have to. If you see a website that says “We are different” you can bet they are not.
Laughing aside, the differentiators will be the Service, the Personnel and the Investment Proposition. We think we excel in all of those areas and to be honest, following the rules is nothing but common sense.
So here follows our six stage Financial Planning process designed especially for you….
[[1]]What is a Financial Intermediator?
The HMRC definition is – a person who:
brings together a person seeking a financial service with a person who provides a financial service.
stands between the parties to a contract and acts in an intermediary capacity, and
undertakes work preparatory to the completion of a contract for the provision of financial services, whether or not it is completed.[[1]]