Retirement income review prompts revisits to processes

Introduction

• 66% have changed their processes following the FCA’s Thematic Review of Retirement Income Advice.
• Introducing or changing advice file record keeping is the most common modification (64%), along with changing client screening processes (60%) and client segmentation (45%).
• 90% of advisers have helped clients at or near retirement adjust their asset allocation.

Two-thirds of advisers have made changes to their processes as a result of the FCA’s Thematic Review of Retirement Income Advice, according to a new poll of financial advisers by Wesleyan Financial Services.*

The FCA review, published in March 2024, suggested that while there are no systemic issues in retirement income advice practices, there are pockets where practices could be improved. These included approaches to determining income withdrawal and gathering information to demonstrate advice suitability.

Reviewing advice processes

Wesleyan’s research revealed that, since the report’s publication, nearly every financial adviser (91%) familiar with its findings has reviewed their advice processes, and two-thirds (66%) of those have already made changes as a result.

Introducing or changing advice file record-keeping was the most common modification (64%), while three in five (60%) advisers have introduced or changed their client screening processes, and 45% have altered the way they segment their clients to offer a more suitable service.

A further quarter (27%) of respondents said that while they haven’t made changes to their processes yet, they plan to do so. Overall, more than three quarters (78%) of advisers polled agree that the Thematic Review has increased the industry’s focus on providing better, more suitable retirement advice.

Karen Blatchford, Wesleyan’s Managing Director of Intermediary Distribution, said: "Our research shows that the industry has taken the FCA’s findings seriously.

"Advisers are being diligent and acting in line with the review’s principles to make sure they’re delivering the best possible outcomes for clients. Revisiting and improving processes will also support firms’ ongoing compliance with the Consumer Duty."

Further findings

Wesleyan’s research also found that nine in ten (90%) advisers have helped clients who are at or nearing retirement adjust their asset allocation in response to the FCA’s findings.

The most popular steps taken have been to increase bonds allocation (55%), followed by decreasing equities allocation (40%).

Karen Blatchford added: "The regulator remains focused on ensuring consumers can access investments that suit their attitude to risk and circumstances.

"Alongside changing asset allocation, advisers have a real opportunity to use specialist funds to help further improve suitability. This includes smoothed funds, which use an actuarial mechanism to hold back some returns during periods of strong fund performance that are then re-distributed during periods of weaker performance.

"This supports clients who may benefit from greater exposure to markets but want to help moderate risk and reduce volatility."

* Survey of 300 UK-based financial advisers regulated to give advice on long-term savings, conducted by Censuswide on behalf of Wesleyan between 20th-23rd August 2024.