11 things we learned from the PFS festival

1. Financial planning conferences can pull off being fun

The Personal Finance Society (PFS) sought to do something different with its conference this year, by in essence doing everything it could to avoid calling it a conference.

The Festival of Financial Planning was certainly a different aesthetic experience, and the PFS has to get an A for presentation. At the heart of the exhibition hall was a large ‘green’ with deckchairs, an inflatable tent for small speaking events and a big screen. Around its perimeter was a plethora of exhibition stands offering activities both digital and analog, from interactive skiing to scalextric and football pool (not as simple as it sounds). Some were also adorned with festival-themed decor such as VW campers, picnic baskets, maybe even a guitar or two.

The theme also allowed for a more relaxed dress code, with a number of delegated opting for the comfort of a t-shirt and jeans, and in some cases even camouflage shorts…

Overall, the PFS’ ambitions to create a light-hearted, enjoyable and altogether unique festival was a success, and the takeaway for other organisations should be not to shy away from being bold and trying something different.

2. Everyone wants to know about DB transfers 

I was denied entry to Alistair Cunningham’s talk on pensions, even when shamelessly flashing the press/VIP pass, because the stands were full. There was also a queue approximately 100 deep being turned away.

Any event with ‘pension transfers’ in its blurb on the programme was packed to the rafters with advisers furiously scribbling notes. Whether firms dealt with the defined benefit (DB) transfer advice directly or outsourced it, all were represented in these talks, showing the extent to which the profession has gained universal awareness of what could be at stake.

3. Festivals need night-time acts

While the exhibition stand gaming and Morris dancers were entertaining, they were only accessible for a couple of hours. All delegates were turfed out of the exhibition hall shortly after 8pm and left to fend for themselves, somewhere in the no man’s land between Birmingham and Solihull.

While I welcome the opportunity to avoid dressing up in black tie, small clusters of advisers gathering sporadically at various hotel bars did not a constructive networking opportunity make.

A big draw of such professional body events is the opportunity for mass mingling, and the lack of an organised evening event in keeping with the lighter, more frivolous theme was somewhat of an anti-climax.

4. The PFS can negotiate a Brexit deal

PFS chief executive Keith Richards revealed holders of the diploma in financial planning will also be able to hold European Financial Planner or European Financial Adviser status from the European Financial Planning Association (EFPA).

The mutual recognition agreement will enable two thirds of PFS members to use the additional qualification designation from early next year.

Richards said the agreement would help mitigate the impact of Brexit on UK consumers if cross border arrangements are lost.

5. The PFS doesn't like acronyms 

The professional body hitherto known as the PFS shall be referred to forthwith and for evermore as the Personal Finance Society.

Richards highlighted that some of the organisation’s own members could not confidently recall what the acronym stood for, hence its decision earlier in the year to rebrand.

He set out the case that if the PFS, sorry, Personal Finance Society, wanted to establish the same level of recognisable public credibility as the Law Society, it needed a more identifiable label.

6. Politicians can admit failure

Liberal Democrat leader Vince Cable admitted that the coalition government ‘did serious damage’ to financial education and engagement among young people.

Cable, who was business secretary in the coalition between 2010 and 2015, said tackling generational inequality involved ensuring everyone received financial education. He said this was only happening on a ‘small scale’ at the moment.

In his keynote speech to end the conference, which attracted a less populous audience than he may have liked, Cable said: 'One of the big failures of the government that I was part of was we did serious damage to the advice and guidance system in schools, so kids are leaving not only without any understanding of money, but without any understanding of job opportunities.'

Under the coalition government spending on pupils up to GCSE level was protected. However spending for education after pupils turned 16 was cut back. Local council spending cutbacks also hit some careers services.

He added: ‘Young people do not have access to secure employment, career progression, pensions, can’t get into the housing market unless the bank of mum and dad will help them.'

7. Flat-rate tax relief could be on the cards...

With the Budget fast approaching this month, former pensions minister Ros Altmann had one suggestion for the chancellor if he wants to help pension savers.

Reports have suggested Philip Hammond will look at reforming tax relief on pension contributions in his Budget on 22 November as a means of saving money.

Altmann suggested that workers would be more likely to save more into pensions if they were given a better tax incentive than the current system offers.

‘What I would like to see is when we do get a reformed incentives structure is flat rate - everybody gets the same, badged as a bonus, tax relief,’ she said.

Under present rules people receive tax relief at their marginal rate. A worker in the basic income tax band, that is someone earning up £45,000 a year, will receive tax relief of 20% on pension contributions, whereas someone earning more than £150,000 will get a 45% relief rate.  

Altmann suggested that changing this to a flat-rate would encourage more people to save into a pension under auto-enrolment as they would have more of an incentive

8. ...but so could pension ISAs

Appearing alongside Altmann, another former pensions minister made a prediction about the future of pensions ahead of Hammond’s Budget.

Steve Webb, who is now director of policy for Royal London, said he expected the government to push pension saving towards an ISA model.

‘In terms of where we are going, I think the inexorable switch from pensions to ISAs would be the most obvious trend,’ he said.

Webb said that he expected pension saving limits to be lowered and ISA limits to be raised in order to encourage more people to save using an ISA wrapper.

‘That way you could end up with a situation where you’ve only got tax relief to build up a pension that was enough for someone on the national average wage, or something like that, and everything else is ISAs. The Treasury would think it was job done,’ he said.

Former chancellor George Osborne was interested in moving pension tax relief to an ISA structure, but dropped plans to do so ahead of his last Budget in March 2016.

9. Advisers should bin some common assumptions

Advisers need to ditch concepts such as 50/50 retirement portfolios and 3% or 4% safe withdrawal rules, according to Finalytiq director Abraham Okusanya.

Okusanya said the idea of a 'safe withdrawal rate', which was first set out by American financial adviser Bill Bengen, needed to be reconsidered.

Bengen's model says advisers should use the worst market performance data as the basis of any safe withdrawal figure. In the USA this equated to 4% and in the UK this was 3.1%.

Okusanya said: 'We should stop talking about 3% rules or 4% rules because there are so many variables in this equation. For instance, Bengen's model didn't take account of impact of fees. What if you had a different asset allocation than these default 50/50 models? What if you are not adjusting your withdrawal in line with inflation every single year?'

10. There's a debate to be had on percentage charges

Advisers using percentage charges would not make it past the four investors on television show Dragon's Den, according to Capital Asset Management chief executive Alan Smith.

Long time flat-fee advocate Smith (pictured) said planners need to recognise that charging clients a percentage of their investments was not a good way of demonstrating value.

He used the example of going before the panel on Dragons' Den, outlining increased life expectancy, pensions freedoms, tax changes, tax rules and showing that there is a huge need and demand for a financial planning service.

He continued: 'So they say "I'm interested, what are your numbers?" And you say "well what we do is we link our revenue to the stock and bond markets". They say "some years that will fall 20-30%, so your revenues will fall 20-30%". You can just imagine at that point them saying "I'm out".'

His views prompted some debate in the New Model Adviser® comments. 


11. Emotions are very important when dealing with DB transfers

In the DB transfer talk I managed to get into, Old Mutual Wealth pensions specialist Martin Clubbs said Advisers need to consider clients’ ‘emotional baggage and bias’ on transfers and avoid generic assumptions about longevity, inflation and sequencing risk.

He said: ‘What I see across the market is loads of activity and effort put into the advice process. Often that’s in relation to the pension issues - what I don’t see a great deal of is the specifics around the investment solution. The DB client falls into the normal investment process. You need to make sure the investment solution they end up in is going to give them the right outcome.’

Clubbs raised four key areas of ‘emotional baggage’ clients may bring to DB transfers: hyperbolic discounting, recency bias (what happens in the recent past formulates an expectation of what is going to happen in the future), loss aversion (disliking losses more than liking gains) and regret aversion (anticipating possible regret of a decision).