Could retirement income advice be the FCA’s next big focus?

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By AdviceBridge

In 2023, the Financial Conduct Authority (FCA) will conduct a thematic review into the retirement income advice that consumers are receiving from their planner. 

The review kicks off in Q1 2023, and a report of the findings is expected to be published before the end of the year. 

With the new Consumer Duty coming into force, you may already be reviewing your retirement advice processes, but what might the FCA be hoping to find in their review? Read on to learn more about the review and what it could mean for you. 

Why is the FCA assessing retirement planning?

The FCA had planned to carry out the work in 2020, but the review needed to be postponed so that they could prioritise their response to the Covid pandemic.

The purpose of the review is to see how well retirement income advice is meeting the needs of consumers, particularly in light of the rising cost of living. 

The Consumer Duty and in particular its requirement for advisers to avoid foreseeable harm for their clients will likely be considered as part of the review. Since the introduction of Pension Freedoms in 2015, more people have been able to access and withdraw from their pension while it remains invested. This can create complex needs and risks, including the risk of the client running out of money in the future. 

Another element of the review will focus on lifetime mortgages and how advisers are supporting consumers in later life. 

A CIP may not be sufficient for clients in retirement

You may already be reassessing the way you provide advice to clients in retirement as a result of Consumer Duty.

But if you just apply your centralised investment proposition (CIP) to clients at or approaching retirement age, you may need to consider a significant change to your processes. 

This is because a CIP will usually focus on the accumulation phase of a client’s life, the objectives of which could be very different from those approaching or at retirement age. 

When a client reaches retirement age, their pension pot is no longer locked away for a future date. For many, it is their income for this year, next year, and the rest of their lives. This affects how much they can afford to risk for future returns. 

As such, you’re likely to need to use a different process, depending on which phase of life your client is in. 

4 practical ways technology can help you to serve your retirement clients 

Investing in the right technology and online systems can help your advice firm to serve more retirement clients, reduce the time your staff spend on admin, and offer a higher quality service. 

1. Careful data collection for risk profiling

When clients begin to consider using their pension for their income, their tolerance for risk changes. It becomes less about how much they are willing to risk and more about how much of a loss they can bear before it affects their day-to-day lives now and in the future. 

AdviceBridge can help collect the data you need and assess this accurately, even helping through machine learning. This involves an “agent” reviewing and learning the client’s situation before analysing any changes. It can also look at risk glide paths and suggest how the user could benefit from adjusting their risk and making dynamic choices year after year.

2. Create bespoke recommendations based on the client’s circumstances

When you have segmented your client base and have all the required information about your client’s needs, you can begin to create your recommendations. 

AdviceBridge makes product analysis and cashflow forecasting quick and easy through automation, cutting down the time needed from your advisers so that they can focus on higher value tasks. 

This also makes cashflow forecasting much more economical, meaning you can offer it to clients with smaller budgets who may ordinarily be priced out of this service. 

3. Automate report generation

With so many clients entering drawdown since the introduction of Pension Freedoms, and more expected in the coming years, advisers are likely to need to spend more time on report generation than ever before. 

By automating reports, AdviceBridge can reduce the hours needed for this essential but time-consuming task. The AdviceBridge platform removes the need for templates and re-keying, pulls together all the information required and automatically updates your client’s financial plan.

4. Help clients to feel reassured during the cost of living crisis

The cost of living crisis is undoubtedly a worrying time for many retirees whose pension pot must now stretch further to cover essential bills and expenses. 

Research reported by Professional Adviser has shown that many recent retirees are even considering returning to work as their pension simply isn’t keeping pace with inflation. 

At times like this, keeping in regular contact with your clients could reassure them of their financial position and help them navigate the crisis. 

The client-facing app from AdviceBridge is designed to help your clients feel connected to their finances. It’s available 24/7 and shows clients the information they need to know and allows them to update necessary details. You’ll even be notified when their circumstances change and require reviewing. 

Get in touch

If you’d like to learn more about how AdviceBridge can help you to serve your retirement clients and get ahead of the FCA review, please get in touch. Email or call us on 020 3925 3850. You can also book a demo of the software at a time to suit you.