We all had high(er) hopes for 2021. We all wanted to see the back end of the pandemic, but instead we got a lockdown (the third in 12 months in the UK) and the emergence of two very concerning variants.
But, on the plus side, an opportunity to brush up on our Greek alphabet knowledge.
Thankfully, 2021 has not only been the (second) year of covid.
It marked the official separation of the UK from the European Union, after nearly five years of negotiations. Smooth it certainly was not, with issues at borders, supply chain disruptions, and manyunresolved caveats.
But for financial services some of the uncertainty was put to rest when the UK and EU agreed on a specific Brexit deal in March.
Even though the deal was signed, advisers and expats still faced restrictions and hurdles.
Despite International Adviser’s own research finding that more than half (55%) of European adviser’s reported a surge in UK clients after Brexit, their British counterparts could not say the same.
This is because, following the split from the EU, UK-based advisers were left unable to service their blob-based clients as the end of passporting rights meant their professional indemnity insurance (PII) would no longer cover such customers.
The most recent blow to British expats in the EU came in the summer of 2021, when they were stripped of national healthcare coverage when visiting the UK.
Social media
Away from politics, 2021 certainly started with a bang when it came to the world of investments.
Retail investors took centre stage when they gathered on online platform Reddit to invest in GameStop, giving some hard times to professional traders and stock pickers.
This was just a prelude to the role social media would have throughout the year.
Influencers turned to TikTok to share ‘investment advice’ following the surge in usage of the social media platform in 2020. Needless to say, such recommendations were neither regulated nor based on any sound or regulated financial planning, but mostly fed into trends – crypto being the biggest of them all – and the investment frenzy started by the GameStop saga.
This prompted the Financial Conduct Authority to warn financial advisers about the risks social media could pose to both their clients and businesses.
The regulator also took its relationship with internet giant Google a step further by getting millions in ad credits to fight online scams on the firm’s search engine, after Brits lost £63m ($83m, €74m) to social media scams in a single year.
In turn, Google toughened its criteria for financial advertisement in the UK over the summer by not allowing any investment firm to sponsor content on its platform unless regulated by the FCA.
But Google and TikTok were not the only two platforms where unregulated advertisement became rife, but it for sure is the best to get TikTok likes.
In one of my investigations this year, I discovered Instagram was being used to offer ridiculously high returns over very short periods of time by firms that were not authorised by the FCA.
Pensions
The past year was also pretty eventful for the pension world – both domestic and offshore.
In March, UK chancellor Rishi Sunak decided against a much talked-about wealth tax to pay for the covid debt, but instead opted to freeze all personal tax thresholds, including the pensions lifetime allowance, for five years.
The move followed more bad news for British expats in Canada, after the UK refused to uprate their pensions – after years of activism and policy lobbying.
But those who do receive an increase every year, saw their hopes of a more than 8% rise in 2022 dashed after the government decided to move to a ‘double lock’ system for the next financial year to adjust for the covid-induced anomaly.
On the offshore front, two huge court cases shaped the industry this year: namely the Carey Pensions and Avacade trails.
These put into question the role that introducers have, and the level of accountability pension providers should have.
For Carey – now Options UK – parent company STM forecast compensation to be around £3.6m, while two directors of Avacade were banned for six years after they paid themselves £1.3m.
Pandora Papers
But the Carey and Avacade court cases were not the only events that shaped the offshore world over the last 12 months.
After the Paradise and Panama Papers, 2021 saw the release of the ‘Pandora Papers’, the latest data leak from the International Consortium of Investigative Journalists shedding a light on how the world’s rich and powerful hide their wealth and avoid paying tax.
Some of the more high-profile people identified by the leak were:
- The king of Jordan;
- Azerbaijan’s leading family;
- Czech prime minister Anderj Babis; and
- The family of Kenyan president Uhuru Kenyatta.
Diversity and inclusion
Last year was also a big one for diversity within the financial advice/wealth sector.
One of the first issues I looked into was the aftermath of a high court ruling which granted women guaranteed minimum pension (GMP) equalisation for pension transfers; the gender gap for pensions currently stands at roughly £1.5bn.
A similar move was made for trans women in the UK who were given the right to claim backdated state pension payments.
On the LGBT+ front, I started 2021 with a follow-on investigation on how HIV+ people (most of whom are LGBT+) are being discriminated against by insurance companies and the way the stigma and generalisations that are still attached to this medical condition hurt them despite the huge advances made in its treatment.
The LGBT+ community faces major obstacles in all areas of personal finance. In a piece I wrote for Pride month in June, I discovered that not only do LGBT+ people generally take home lower salaries than their heterosexual counterparts, but depending on what letter of the acronym a person is described as, they are also more likely to suffer financially.
As a result, it can be harder for them to build up a pension.
But its not all bad news, luckily.
In another investigation, I found that trans people hardly face any issues when taking out protection cover or if they need to change their gander in an already existing policy.
Into 2022 and beyond
But if there is one thing I’d want to carry into the New Year, it is an article I wrote about how the sector can improve following scandal after scandal after scandal.
2022 is undoubtedly going to be hard, and the last thing I would want to report is another investment firm collapsing or being shut down for mis-selling products, leaving thousands of savers high and dry and needing to fight for years to recoup at least some of their money.
Enter the ‘mystery shopper’.
In Singapore, the financial regulator periodically has mystery shopping exercises to assess the quality and suitability of financial advice, as well as client outcomes, treatment and tailoring of services according to their needs and circumstances.
Even though I was only able to find a couple of instances were such a tactic was used by the FCA, with its increasing focus on customer duty, care and outcomes, sending undercover staff to check on businesses wouldn’t be such a bad idea after all.
It would certainly save resources and money in the long run, as it would reduce the time and costs associated with dealing with failed firms and compensation due to clients, but it would also answer the industry’s long time call for finding effective ways to drive out the ‘bad apples’ and not make the others pay for their mistakes.
