REGULATORY EXPERTISE
Retirement income advice The FCA rightly recognises the crucial role advisers play in helping consumers make good decisions with their retirement capital , and this thematic review publication offers welcome clarity to the advice sector and will provide a benchmark for firms in terms of expectations for the coming years . It is a must-read for all firms active in this space . The review overall revealed a mixed picture with both good and poor practice . Notably , however , there were concerns around suitability of advice , and also failings of firms ’ controls and governance . On advice suitability , some of the standout concerns raised included expenditure analysis not recorded or completed ; lack of evidence to support understanding of risk , information about wider financial circumstances , for example , other pension provision and the state pension missing ; future lifestyle changes not explored or recorded ; loss of guarantees and features ; and unnecessary charges or tax . To support firms , the FCA has released a Retirement Income Advice Assessment Tool which sets out FCA expectations and aims to drive consistency of process . Firms are encouraged to use this methodology to review past business , albeit there is no guidance as to what extent this would appear to align with the monitoring outcomes requirement under Consumer Duty . The FCA also raised concerns around how firms were monitoring income sustainability . Whilst the FCA stopped short of stating all firms should adopt cashflow modelling , it did reference that this tool has a ‘ significant role ’ to play in educating a customer around the strategy being recommended and also assessing capacity for loss . For any firm using cashflow modelling , it is essential that you review the FCA Cashflow Modelling article which sets out expectations . A CFM tool used incorrectly risks leading to unsuitable advice . The FCA has evolved in recent times to be a data-led regulator , as outlined in our recent contribution , so the concern firms had difficulty providing the requested information shouldn ’ t be overlooked . There was one particularly stark observation regarding advice registers , with the FCA stating : “ In several instances , we found advice registers were so inaccurate that the advice scenario for files we received did not match what was recorded ”. The inference being , without accurate advice registers , how would a firm know whether consumers had received suitable outcomes , a key component of Consumer Duty annual assessments . This would appear to be a significant call to action – get your advice registers in order before the FCA starts supervisory activity in this space .
THIS WOULD APPEAR TO BE A SIGNIFICANT CALL TO ACTION – GET YOUR ADVICE REGISTERS IN ORDER BEFORE THE FCA STARTS SUPERVISORY ACTIVITY IN THIS SPACE .
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