Some key areas to consider:
- The features and benefits of platforms, products, investment strategies/funds, tools and other third-party services used in your firm’s CRP all need to be considered to ensure they are appropriate for retirement income clients.
- Due diligence and reasons for selecting providers or solutions need to be documented and regularly reviewed.
- Where clients want an element of secure income, you should be able to demonstrate that an annuity has been considered and why it was discounted.
- Firms advising on lifetime mortgages need to consider the FCA’s findings from its separate review of lifetime mortgages.
- Where offering independent advice, you should be able to show that you have a sufficiently diverse range of products to meet customer needs.
- Appropriate controls need to be in place to manage any conflicts of interest inherent in the products and solutions offered, such as white-labelled platforms or recommending solutions from a connected company.
10. Client understanding
A key risk highlighted by the FCA is the impact of poor decisions due to the complexity of retirement income planning.
In many cases, client losses cannot be mitigated, for example by the client returning to work.
The FCA highlighted the importance of advice in supporting clients to understand their options and the consequences of their actions.
Firms should consider how they can support client understanding through their communications, services and recommendations.
Good examples highlighted by the FCA involved firms employing a range of different tools, such as cash flow modelling, to help illustrate complex information and potential scenarios and options.
The FCA also found poor examples where risks (such as tax implications, capital erosion, worsening annuity rates or unsustainable income) were not properly disclosed to clients, or generic disclosures were used that were not tailored to the client’s particular scenario.
Firms should also consider the products and solutions they recommend to ensure clients are not investing in complex solutions that they do not understand.
Julie Hardie is a policy consultant at Threesixty services
