FCA robo-advice review comment

Following the FCA’s statement on robo-advice, which required many providers to make ‘significant changes’, Robbie Constance, Head of Financial Services Regulatory, DWF, commented: “It is no surprise that robo-advisers and ‘online discretionary investment managers’ are having teething troubles, especially when we take into account the complex regulatory regime these services operate under. Rather than allow for cheap and simple alternative services, MiFID II expressly requires that direct to consumer digital investment businesses achieve the same high standards as face-to-face advisers.

“Robo-advisers that are already in operation have some urgent work to do to ensure that they are compliant with the current guidelines. Those still in ‘build mode’ – particularly banks – will no doubt take stock of the FCA’s statement, and add it to their long list of regulatory and other risks to worry about.

“If they haven’t already done so, firms should critically assess the FCA’s article, carry out an urgent ‘gap analysis’ against their own proposition and reconsider their product governance in light of this – and the MiFID II rules. It’s the perfect time for an independent third party to work with digital investment businesses to develop best practice.

“Unusually – but understandable given the FCA’s enthusiasm for fintech and need to encourage solutions to fill the ‘advice gap’ – there is no dire warning of enforcement action or remedial timeline imposed. Firms will welcome the softly sofly approach of feedback and a reminder of the need to get things right. In less favoured sectors of financial services, the FCA’s findings would probably have resulted in ‘Dear CEO’ letters, skilled persons’ reviews, variations of permissions, remediation – and worse. For now the FCA has shown willing to wait and see.”

ASTL quarterly results show continued strength

Figures compiled by the ASTL’s auditors from its bridging lender members for Q1 2018 have exceeded the outstanding figures for Q4 2017, when for the first-time quarterly completions exceeded £1 billion. Annual completions are now close to £3.8 billion.

The value of loans written for the quarter ending 31 March 2018 revealed an increase of 1.5% compared to the previous quarter. Annual completions rose by 29.9%. In comparison to the same quarter last year, the value of loans written in the quarter has increased by 32.5%.

Total loan books are continuing to climb, with a rise of 13.1% compared to Q4 2017. Compared to the end of Q1 2017, the value of loan books has risen by 35.6%, to £4.2 billion. All figures highlight the current strength of the ASTL’s bridging lender members.

The pace of increases in applications reversed recent declines and increased by 28.9% compared to a decrease of 11% in Q4 2017. On an annualised basis, applications are up by 23.2%, making up a total of £19.7 billion. Although applications do tend to be unreliable indicators and are dependent on how many lenders are offered the same deals, this is still a staggeringly large figure.

Benson Hersch, CEO of the ASTL says: “Our figures highlight the fact that the bridging finance industry is in good shape and is ready and willing to meet the challenges and opportunities of today’s market.”

“The bridging sector is now a well-established part of the property finance market and, barring any black swans, should continue to grow.”

These figures are taken from the responses from ASTL members, which include most of the key lenders in the bridging market.

StepChange Debt Charity comments on Which? letter to FCA on overdrafts

In a letter addressed to the FCA signed by 84 MPs, Which? today [23rd May] demands urgent action on restricting unarranged overdraft charges to the same level as arranged overdrafts, alongside publishing findings that unauthorised overdrafts can cost more than payday loans.

Commenting on overdrafts, Peter Tutton, Head of Policy at StepChange Debt Charity, said: “Overdrafts are the second most common type of debt our charity deals with, leaving many at risk of falling into persistent problem debt by entering a cycle of using their overdraft from month to month. They are meant to be short-term, but our evidence shows that they can all too easily trap people in expensive and long-term cycles of persistent debt.

“Fundamental reform is needed. There has been positive action from some banks to make charging structures clearer and to abolish unarranged overdraft charges. We know that there is some good practice when it comes to the treatment of people with overdraft debt that can be built upon. Banks which have not yet done so should follow suit, while the FCA should investigate unaffordable lending in the overdraft market as part of its upcoming consultation on high-cost credit and overdrafts.”

Payments community calls on Open Banking to do more to enable access for FinTechs

The Emerging Payments Association (EPA) has written to the Open Banking Implementation Entity (OBIE) calling for the OBIE to amend the terms of the CMA’s framework so that emerging payments organisations can realise the potential of Open Banking.

The EPA’s ‘Open Letter’ represents the views of many EPA members, sharing their concerns about the barriers that could inhibit FinTechs from engaging with Open Banking. EPA members believe that the nine banks currently covered by the Competition and Markets Authority (CMA) framework have displayed varying levels of enthusiasm in embracing certain aspects of Open Banking, with some described as striving to meet the letter, rather than the spirit, of Open Banking.

The Open Letter, supported by the EPA Advisory Board and the association’s 130+ members, covers several EPA members’ concerns, including;
1) Banks’ compliance with Open Banking
2) Public perception and consumer protection
3) API standards
4) Data standards
5) Customer journeys
6) Scope of Open Banking

EPA members urge the OBIE to elaborate on the detail behind the framework it has implemented. Members seek more clarity for both banks and Third Party Providers (TPPs) about the services and obligations that will create the desired ‘open’ customer experience.

Furthermore, EPA members believe that there is a lack of understanding about, and trust in, Open Banking from both consumers, and TPPs. This lack of understanding and trust are a significant obstacle to customer uptake. To overcome this obstacle, the EPA believes it is essential improve the messaging around Open Banking and to provide certainty and protection to customers.

Tony Craddock, Director General of the EPA, commented, “Just having Open Banking will not stimulate innovation on its own. You have to collaborate to stimulate innovation. This Open Letter highlights what is missing from Open Banking and what needs to be done now to ensure its success. We hope it will enable collaboration between the EPA’s progressive payments companies and Open Banking. I believe that everyone using and facilitating payments will benefit.”

Statnett Optimises Norway’s Electricity with FICO Analytics

Statnett, the Norwegian transmission systems operator (TSO) for energy, has selected FICO® Xpress Optimization to power their models of the future of electricity needs in Norway and optimise the current infrastructure. The solution will be used across the organisation to process, analyse and plan key factors relating to the sector.

Statnett operates nearly 11,000 km of high voltage power lines across Norway and is responsible for creating the next-generation main grid and securing the power supply of the future. To fulfill its mission, the organisation forecasts the country’s future electricity needs and market changes through 2040 and beyond.

“We are both looking at the current infrastructure as well as the energy requirements of the future, including trying to understand future market behaviours connected to electricity pricing,” said Ivar Husevåg Døskeland, senior business analyst at Statnett. “We plan to invest £3-4 billion in the power grid between 2018 and 2022.”

The complex task of both ensuring stable delivery of electricity now and looking ahead in a constantly evolving sector requires powerful tools and partners. Statnett has a well-established partnership with SINTEF, a Norwegian research institute that builds analytic models for different scenarios related to above challenges. To process, analyse and plan the future of electricity in Norway using these models, Statnett reviewed the market and chose FICO Xpress Optimization.

”As part of working with Statnett, we connected them with other FICO Xpress Optimization users,” said Dylan Jones, who manages Nordic operations at FICO. “Their counsel showed Statnett how it could use Xpress Optimization to maximise the value from their entire supply chain, eliminating the need for them to buy multiple solvers for different applications.”

“The breadth of FICO Xpress Optimization’s capabilities ensures that we have a solution that can be widely used across the organisation now and in the future,” said Døskeland.

One in six bankrupts declaring assets have over £50,000 – R3

One-in-six (15%) people who declared their assets when entering bankruptcy in 2016-17 had assets worth over £50,000, serving as a stark reminder that you can’t be ‘too wealthy’ to be bankrupt, says insolvency trade body R3.
According to the data, provided by the Insolvency Service, 60 people entering bankruptcy in 2016-17 declared assets between £500,000 and £999,000; 26 had assets over £1m.

Bankruptcy is a personal insolvency procedure where the insolvent person’s assets may be sold by a trustee to raise money to repay creditors. Bankrupts face restrictions on borrowing money or acting as a director, typically for a year. After a year, the bankrupt is discharged with their remaining debts written off. People can apply to enter bankruptcy, or, if they owe more than £5,000 to one creditor, their creditors can ask a court to impose a bankruptcy order.

R3 says that misconceptions about bankruptcy and the stigma still attached to it can put people off seeking advice about the process, even if it might help them with their financial situation.

Mark Sands, R3’s personal insolvency committee chair, says: “Perception and stigma can be effective barriers to seeking help about financial difficulties. You can often encounter a belief that bankruptcy is something that ‘doesn’t happen’ to people who others might typically see as financially comfortable, or even wealthy. This stops people from getting advice when it would be helpful, or it means they don’t take steps to address their financial problems before it’s too late.

“Anyone, no matter how wealthy they may appear, can have serious financial issues. Someone with a lot of assets could have bigger still debts – it’s all relative. Anyone can be vulnerable to financial shocks, too: common causes of bankruptcy are the failure of a person’s own business, ill health or a relationship breakdown. Unexpected tax demands can also lead to bankruptcy for higher earners, particularly those on the receiving end of Accelerated Payment Notices linked to tax schemes.

“The sooner people seek advice about their financial situation, the more options they have and the easier it will be to resolve their problems.”

R3 says that the true number of ‘wealthy’ people becoming bankrupt could be even higher.

Mark Sands says: “Some people will have exhausted all or nearly all of their assets trying to avoid bankruptcy. Others, meanwhile, will go to every effort to try and hide assets which would otherwise be available to creditors – by moving funds to offshore accounts, hiding high-value items, or signing over property to family members. In these latter cases, the trustee in bankruptcy has the power to investigate and retrieve those assets for creditors.”

Over a third (38%) of individuals entering bankruptcy do not declare their level of assets.

Bankruptcy is one of three types of statutory insolvency procedure, alongside Individual Voluntary Arrangements (where an individual usually retains their assets and agrees to pay back a proportion of debts to creditors over a set period of time) and Debt Relief Orders (a low-debt, low-asset version of bankruptcy where the individual retains their assets and no repayments are made to creditors). Bankruptcy is the least common form of personal insolvency procedure.

Of 99,196 insolvencies in 2017, 15,082 were bankruptcies. Bankruptcy numbers most recently peaked in 2009 when there were 74,671 bankruptcies out of 134,143 insolvencies. An improving economy and the introduction of DROs have since put downward pressure on bankruptcies.

According to the Insolvency Service, in 2015 (the latest year for which such statistics are available), of those bankruptcies due to reasons unrelated to the bankrupt person’s business, the greatest proportion were listed as “living beyond means”, at 2,105 cases. The next most common reasons were “relationship breakdown” (1,715) and “significant reduction of bankrupt’s income” (1,515). For individual bankruptcies which were related to business performance (3,800 altogether), the most commonly-given reason was “management failure” (1,150), followed closely by “loss of market” (1,140).

Mark Sands adds: “Whatever your current level of income and wealth, financial planning is a must. If you are facing financial difficulties, talking to a trained and qualified adviser can be a vital step, and finding a form of insolvency that is right for you can be the first step on a road to financial recovery.”

Fintech pioneer Centtrip launches bespoke fee structure

Fintech pioneer Centtrip has introduced a bespoke fee structure available to all its corporate clients, enabling them to decide when and how they are charged from the outset.

Having initially introduced the maximum 0.5 per cent fixed fee structure to allow clients to benefit from free foreign exchange and international payments when it launched in 2015, Centtrip has extended its offering by introducing personalised and very competitive fee plans to corporate clients. From depositing funds to their account and converting currencies to making local or international payments and transferring funds to a Centtrip multi-currency Mastercard, clients can define their own fee structure based on their unique business needs and goals, once again benefitting from having complete control over their finances with Centtrip.

All the fees are agreed, transparent and fixed from the start. Companies can adjust their fee structure as their requirements evolve by simply picking up the phone and discussing a change in strategy with one of Centtrip’s experts. Once agreed, changes are effective immediately.

Centtrip’s new approach is a result of constant interaction and consultation with its clients. It helps ensure businesses only pay for the services and products they need and use, saving them from wasting money or being locked into long-term inflexible contracts.

Brian Jamieson, co-founder and CEO of Centtrip, said: “SMEs are the lifeblood of the economy, so it is crucial they have the tools and support to operate efficiently. Instead of adopting a one-size-fits-all approach and charging companies premium rates, we have shaken up the status quo. All businesses have different needs, so a fee structure that meets those needs now and provides the flexibility to accommodate evolving requirements and future growth is vital. We provide our customers with assurance and confidence to exercise far greater control when managing their finances, knowing we are there to support them throughout. With our innovative technology and dedicated specialists, we give clients the best of both worlds and are committed to serving the SME market to help companies realise their full potential.”

British businesses have £680bn in hidden cash

British businesses have around £680 billion tied up in working capital, according to new research on more than 5,400 businesses from Lloyds Bank Commercial Banking.

Working capital is the amount of money that a company ties up in the day-to-day costs of doing business, and tends to increase as businesses grow or as efficiency falls.

Lloyds Bank’s Working Capital Index found that businesses’ annual revenues have increased, on average, causing the amount of cash tied up in inventory or unpaid invoices to increase by 6 per cent in the last year.

This puts pressure on firms’ cash flow and could leave many firms ill-prepared to quickly access the funds they might need to take on any unforeseen opportunities or challenges.

While partly caused by the fact businesses were growing, the report also found that firms – and particularly smaller ones – were becoming less efficient at collecting cash from their customers, making the problem worse.

Ed Thurman, managing director, head of Global Transaction Banking at Lloyds Bank, said: “Revenue growth is good news for British business, but to improve efficiency is going to take investment and that requires cash flow.

“Small firms in particular are taking even longer to free up cash from inventory and unpaid invoices. The longer that money remains unavailable, the less firms can invest in growth, new machinery or pay down debts.

“Companies that manage their working capital well can generate healthy cash flow and will be best placed to invest in their businesses and take advantage of new trading opportunities

“Those who don’t may find it difficult to deal with a potential rise in interest rates later this year, or to take on the opportunities and challenges created by Brexit.”

The report found that annual revenue growth nearly quadrupled during 2017 to 8.3 per cent, from 2.1 per cent in 2016.

At the same time, firms’ inventory levels increased 10.6 per cent during 2017, while outstanding invoices increased 10.3 per cent

Firms responded by lengthening the time, in days, that they took to pay suppliers. But this primarily benefited larger firms, 13 per cent of whom said they were now taking longer to pay suppliers, compared with just four per cent of small firms.

Looking ahead, almost a third of businesses (31 per cent) said demand uncertainty was their biggest concern affecting their management of working capital and cash flow in the year ahead. This was followed by changes to payment terms (16 per cent) and rising costs (13 per cent).
Lloyds Bank has recently partnered with Be the Business, a new free to join and use business movement set up to unlock practical and pragmatic practices that help productivity and share them across the UK.

Tony Danker, chief executive of Be the Business, said “Productive companies get more out of what they’ve got, enabling them to increase their profits, pay higher wages and invest in their future. This Lloyds Bank research shows the importance of closely managing working capital and how even small improvements can yield dramatic results for a business.

“Through our partnership with Lloyds Bank we hope to support as many UK firms as we can to put in place the simple management and business practices used by the best to be successful.”

Teleperformance Receives European Union Binding Corporate Rules ( BCRs ) Approval

Teleperformance the worldwide leader in omnichannel customer experience management, today announced it has received Binding Corporate Rules (BCRs) approval as both a data controller and data processor from the French Data Protection Authority, CNIL, making Teleperformance the first company in the industry to attain this critical data protection compliance status in the European Union.
Attaining BCRs approved status is a long and rigorous process that ensures a company has a comprehensive and effective framework to safely and legally transfer private EU data out of Europe for applications such as customer sales and service, technical support and back-office processing applications.
Teleperformance was assisted during the approval process by Promontory Financial Group, the global leader in data privacy protection.
Alan Winters, Deputy Chief Global Compliance Officer & Chief Privacy Officer, Teleperformance Group, commented: “Teleperformance is intensely focused on data protection and privacy at all times, everywhere in the world. Attaining approved BCRs status is more than a major industry first milestone for data transfer security and governance; BCRs allows us to offer clients total global operational flexibilities to deliver a safer and better customer experience for their EU consumers anywhere and on every interaction.”
Simon McDougall, Managing Director, Promontory Financial Group and Board Member of the International Association of Privacy Professionals, added: “Teleperformance’s existing comprehensive privacy program and robust control framework led to the fastest BCRs approval process that I am aware of to-date in any industry. This is a real differentiator for Teleperformance as it allows their clients to choose service locations anywhere in the world while assuring their customers are protected in international data transfers. Promontory was delighted to assist Teleperformance based on their clear commitment to privacy good practice.”
Daniel Julien, Chairman and Group CEO, Teleperformance Group, stated: “As the global industry leader, we have an absolute responsibility to our clients, their customers, our key stakeholders and the whole market to set the highest standards possible in every aspect of our business including data privacy and security. Attaining BCRs approval in record time is just one more example of our total commitment to provide maximum flexibility and safety to our clients and their customers on each interaction; regardless of delivery location or channel. We are and we will remain totally obsessional on privacy, security and data protection.”

Together helps a mum and son achieve their property ownership dream

A mother and son have bought the council house where they’d lived for more than a decade thanks to a residential home loan from specialist lender Together.

They had been unable to get a mortgage under the Government-backed right to buy scheme because he had just taken up a new job at a garden centre which supports adults with disabilities, and his mum was receiving jobseekers’ allowance while looking for work.

The mother and son had lived together in their rented home for more than 11 years and had always wanted to buy it together. However, they hadn’t realised that their employment status, as well as the fact they were buying under right to buy, meant they would struggle to get a home loan from a high street bank or building society.

The customers discovered Together could help following a search on the internet. An in-house adviser at the specialist mortgage lender spoke to them both and its expert underwriters looked into all aspects of their backgrounds, including his employment contract, previous payslips, and their long history of rental payments.

Richard Tugwell, a director at Together, explained: “The son had started a new job and was, technically, on a zero hour contract at his new employment, meaning it would have been difficult, if not impossible to be able to get a mortgage through mainstream channels.

“Using our common sense philosophy and a personal approach to mortgage advice and underwriting, we looked at the son’s employment history and found that he had been consistently working beforehand and was working full-time hours in a stable job.

“We also found that the mortgage was affordable in their joint names, taking into account their impeccable credit records and the fact that the mother was actively seeking work, so was eligible for Government benefits. We took all these factors into consideration when deciding to provide the finance.”

Together agreed to provide a £24,470 first charge mortgage, secured against their £46,000 council house, while the customers paid a deposit of £2,300

Mr Tugwell added: “We’re delighted that we’ve managed to help them in their dream of home ownership. The capital repayments on the loan are less than they had been paying their local council in rent, so it was a great outcome for them.”