Experts says FCA review highlights key role of Planners
The FCA’s thematic review - which investigated how firms were providing retirement income advice - has demonstrated the value of a good Financial Planner, according to financial professionals.
The FCA review found that advisers were mostly providing a good service to retirement income clients but there were many areas for improvement.
Key areas identified for improvement by the regulator included using personal information, including risk profiling, to set income withdrawals and advice suitability.
Stuart Ritchie, managing partner of wealth manager GSB Capital, said that the review underscored the important role Financial Planners play when it comes to their clients’ financial wellbeing.
He said that while it was positive that some firms were prioritising their clients' needs and designing advice models for positive outcomes, others were falling short and needed to make changes.
He highlighted issues such as insufficient risk profiling, inadequate information collection, and failure to deliver periodic reviews.
Mr Ritchie added: "Sarah Pritchard's remarks underscore the vital role Financial Planners play in securing consumers' long-term financial well-being. In my opinion, adhering to regulatory standards isn't just about compliance; it's about upholding trust and delivering genuine value to our clients, especially at such a critical stage of their lives."
Investment and SIPP platform AJ Bell said the FCA review served as a reminder of how important record keeping was for Financial Planners.
Rachel Vahey, head of public policy at AJ Bell, said: “The biggest fault the FCA identified is on record keeping. It wants a much clearer picture of how customers’ individual needs are considered when reaching decisions on retirement income. It’s not so much that wrong decisions are made – just the evidence backing them up is missing in the files.
“This serves as a useful reminder for financial advisers for all areas of advice – it’s all about record keeping. And that inadequate records create risks for all aspects of the advice journey and achievement of good customer outcomes. The FCA wants to see evidence the right factors are being considered and that those customers paying ongoing fees are getting a service back in return.”
Hymans Robertson said the greatest takeaway when looking at the FCA’s report was the need for advisers to take a more holistic approach.
Kate Rainbow, head of key accounts at consultants Hymans Robertson, said: “We believe that a holistic approach will be key. It will be important to ensure that the investment solutions IFAs use are robust, for example to be able to evidence that they have been stress-tested to account for a range of forward looking economic scenarios. Equally, it will be key to demonstrate an evidence and data led approach towards calculating and communicating personalised withdrawal rates, accounting for individual’s specific circumstance rather than relying on averages.
“This, combined with customer-focussed communications will put advisers in the best position to avoid foreseeable harm, to deliver great outcomes and offer value for money.”
Nick Henshaw, head of intermediary distribution at financial services mutual Wesleyan, agreed that it was important for advisers to review the investment solutions they use are robust and designed to meet specific needs.
He said: “The FCA has highlighted income withdrawals not taking individual circumstances into account as an area for improvement. It is critical that advisers have effective processes in place to determine clients’ unique circumstances, but they are only the first ingredient of delivering suitable retirement income advice. Establishing the right investment strategy to deliver a sustainable income through retirement is just as important, particularly during periods of economic uncertainty and market volatility.
“This includes making sure clients in decumulation are taking advantage of the full range of specialist funds available to them, many of which are designed to meet specific needs. Funds with a smoothing mechanism, for example, can deliver consistent returns to help protect against short-term fluctuations in value and can form a vital part of retried clients’ investment strategies.”
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