“Unequivocal clarity” required from new government as advisers pinpoint what today’s election result means for them – and the financial advice profession

With Sir Keir Starmer now formally appointed as the UK’s new Prime Minister, we wanted to know what advisers think his new government might mean for the financial advice profession.  We’ve asked some of the members of our financial adviser editorial panel what they believe this significant election result might mean for them, their clients and the financial advice profession more broadly.

Kicking things off, Matt Wood, ACSI, Managing Director at IFA firm, AMFA, confessed that his glass is half full rather than half empty just now, saying: “We can say with relative certainty that this change in government will be met with a generally positive sentiment, providing a ‘fresh start’ after an extremely tough few years for individuals, families and businesses alike. What we need from our new government is unequivocal clarity. The recent theme of ‘Politics behind the Politics’ with a track record of brash comments, crazy budgets and pot-stirring must be put to bed so that our industry can move away from the limbo that these behaviours have left us in. A glimmer of hope comes from the recent shift of the Labour party in their stance towards reintroducing the pension lifetime allowance which has been a point of frustration for many Pension savers and Financial Advisers alike throughout since April 2023.

“Arguably, our industry is still trying to find a balance between regulatory compliance and delivering effective, value-driven consumer outcomes introduced with Consumer Duty. I am most excited by Labour’s indicated attitude towards innovation and streamlining our regulatory framework, highlighted by their proposal to introduce a Regulatory Innovation Office and streamline the FCA handbook. With an additional focus on regulatory innovation, sustainability, and consumer protections, financial advisers will be required to stay abreast of new regulations and adapt accordingly. While it all sounds great on paper, we have all been through a whirlwind of regulatory change, with compliance officers currently overwhelmed by Consumer Duty Board Reports and Value Assessments. Is this just going to alienate the industry further, and does anyone actually have the energy to address it?

 
 

“Our rising generations could be the answer here so the importance of financial education for new this demographic cannot be overstated. This is true whether they are trying to access financial advice or simply as contributors to our economy, young people need robust financial literacy in order to navigate the complexities of modern finance. I hope that the UK government can empower future generations to make informed decisions, be responsible towards their finances and build a secure financial future ultimately benefitting communities and our broader economy.

“Considering the UK’s political landscape since 2010, we have seen a continuous Conservative government, but not a particularly coherent one, with five different Prime Ministers and six Chancellors of the Exchequer. Perhaps it could be said that we haven’t even ended up with the B team, nor C nor D, but rather 4th and 5th tier politicians who have remained in power throughout some of the most turbulent times our country has seen in decades. So perhaps change really could be a good thing?

“With that said any government coming into power needs to provide clarity in fiscal policy, clarity in pensions legislation and clarity in regulatory frameworks. Financial Advisers must have understanding about the future of tax reliefs, the intricacies of consumer duty and the direction of the indicated sustainable finance policies. I strongly believe that in growing a Financial Advice business to any scale we must be positive, pragmatic and patient but without clarity the former are certainly difficult so perhaps patience is the order of the day!

 
 

Focusing on interactions with clients, Katie Brinsden, Managing Director of Truly Independent, said:“Setting all politics aside, the key point for advisers is that events like elections always generate a degree of uncertainty over the short term.

“It’s therefore essential to stress to clients the importance of not losing focus on the bigger picture and their long-term objectives.

“Many clients might be best advised to hold firm and avoid dramatic changes. Others are likely to see this as grounds for a ‘reset’.

 
 

“In both cases, as in any circumstances, we need to offer suitable support and guidance with a view to achieving optimum outcomes.

“That includes planning client reviews at the earliest opportunity with a view to preparing for potential shifts in tax policy and positions.”

David Batchelor, Senior Partner, Wills & Trusts Chartered Financial Planning, believes that the Labour landslide has implications for advisers and their clients as he says “I believe our clients will be hit with higher taxation but will benefit from further market rises.”

 
 

Explaining the key reasons behind his thinking, Batchelor said: “The nature of an IFA is that we generally deal with the most wealthy 20% in society. That’s the 20% who Labour will be looking to tax to pay for the ‘fully costed’ spending plans. I expect labour to increase net taxation in the following four areas:

1. VAT on school fees.

2. Increases in CGT taxation

 
 

3. Increases in IHT 

4. Increases in corporation tax

“The VAT in school fees has already been announced. However if you read the House of Lords debate on this subject you will know that this is a pointless move economically, and was simply a political statement.

 
 

“The Manifesto was noticeably silent on CGT, IHT and detail on corporation tax. Why? It leaves the new chancellor with the opportunity to increase tax without going back on pledges.

“For the economy, the size of the majority gives stability to the government and this gives the markets the stability that they need to move forward. This may have already been priced in to a great degree, but will no doubt help the markets continue the rise that they have experienced this year.”

For Ahmed Bawa, CEO, Rosemount Financial Solutions (IFA), the big thing for all of us in financial services will be stability as he explains: “There has been so much instability and uncertainty, particularly when you go back to the Liz Truss administration, and the impact that had on the mortgage market, but hopefully that will be at an end with the new government.

 
 

“However, there will be some anxiety around what will happen now, and what the new government will mean for advisers and our clients. Only time will tell if they are going to get carried away with spending money, which could mean a return to the inflationary pressures that have been such an issue over the last few years, or whether the new administration will be more sensible with their spending.

“It will also be interesting to see what happens with the various pension allowances. The Conservative government has removed the lifetime allowance entirely and increased the annual allowance, but if those changes are reversed that will have an impact on people’s career plans. These would include older people returning to the workforce and professionals, like doctors, who may instead opt to take early retirement or reduce their hours to avoid being impacted. In addition, there is the prospect of changes to inheritance tax which will also need to be taken into account when helping clients formulate their long-term plans.”

“It’s worth reflecting on the change of the political scene too, with the emergence of more political parties, like Reform and the Green Party. We will soon see what influence they may have on the way things work, and by extension the prospects for financial services.”

 
 

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