The FCA has published a Thematic Review and written to CEOs of financial advisers, asking them to assess the compliance of their retirement income advice, and take steps to address any shortcomings they find. It understands that firms operate in many different ways, but its review found a number of themes that suggest several firms could improve. The FCA’s main concerns relate to:
- firms taking an approach to determining income withdrawals without taking enough account of individual circumstances, or based their approach on undocumented methods or assumptions;
- often risk profiling was either not evidenced or was not consistent with customer objectives, knowledge and ability to bear loss;
- lack of enough information about customers to determine suitability;
- failure to deliver periodic reviews of suitability which customers had paid for; and
- poor records which mean the control framework could not properly assess customer outcomes.
These failings also lead the FCA to believe many firms would fail to show their compliance with the Consumer Duty.
The FCA wants all firms to consider the review findings and take steps to meet its requirements. It has published a Retirement Income Advice Assessment Tool and an article on use of Cash Flow Modelling to help firms.
While the FCA does not require firms to confirm to it that they have taken appropriate action, it will follow up on the review findings generally with relevant firms.