Investment - Articles - Be prepared for Investment Pathways or risk regulatory wrath


Hymans Robertson is warning firms to ensure they’re fully prepared for the introduction of the FCA Investment Pathways for pensions income drawdown. With only a matter of months before the 1 February deadline for their mandatory introduction, there is significant regulatory risk for those affected who don’t have a clear plan in place, claims the leading pensions and financial services firm. It is urging providers to implement technology to meet the regulatory requirements.

 Commenting on the need for firms to look at technology as a priority to help deliver Investment Pathways, Paul Waters, Head of Strategic Digital Solutions, says: “Compliance with the FCA’s Investment Pathways can be fairly straightforward if firms have the right technology in place, but time is running out to make that happen. This technology can help manage the regulatory risk by showing that providers have educated customers and presented risks, as well as capturing all the regulatory reporting data required by the FCA. While implementation can be fast, leaving it too late to make the decision about how to offer Pathways and ensuring all the communication and compliance elements are in place, firms are in danger of falling foul of the regulator by not having a robust enough customer experience available in time for the deadline.

 “For much of the industry providing investment options is “the day job” and straightforward. Yet, ensuring that non advised customers can understand them and make an informed decision may not be. This can be tackled by using technology, so that firms can communicate the four pathways and associated investments clearly. This will lead to better customer outcomes as they make decisions that best meet their needs. By implementing digital communications, the provider will have the advantage of having data insight on customer behaviour. This can then enable providers to learn from how these customers interact with their products and then make incremental improvements.

 “The FCA has been fairly prescriptive in outlining its requirements for the Pathways so there is a procedure to follow. Yet, despite it being a regulatory requirement, this shouldn’t be seen as simply a compliance exercise. Large numbers of people have significant amounts of money to lose by making the wrong choices but insufficient wealth for financial advice to be accessible and sensible. Providers should see the implementation of Investment Pathways as an opportunity to enable the masses to make really informed decisions at the point of retirement and attain better retirement outcomes. There is a clear gap in the market for customers who do not have significant enough pots to engage a financial adviser, but can ill afford to reduce their income unnecessarily through a lack of education and solid decumulation product options.

 “Firms can use technology to help guide these non-advised consumers to choose the best investment route for their own needs. It is important for the customer to feel totally comfortable that the pathway they’ve chosen is the right one for them and providers mustn’t lose sight of this.”

 Paul continues to explain why personalising investment pathway choices will be vital for firms: “For those firms who can give consumers clear guidance and confidence about the choices they face there will be other benefits too. Those that have the technology in place to provide consumers with clarity about drawdown as they reach the point of retirement are going to be the ones who retain the most customers, as well as their assets. Customers will be increasingly reaching this point with multiple pension pots. They’ll want to merge these pots, and if the decisions they face are made straightforward, that firm will benefit. If they don’t, others will be attracting their customers and their assets.”

 Explaining about the development of Hymans Robertson’s GO for Investment Pathways, Paul says: “Recognising the need for technology to play a key part in helping providers meet the needs of customer as they deliver Investment Pathways we drew on the many years of experience and understanding we’ve built up through the use of our highly successful Guided Outcomes (GO) model for engaging consumers with financial decisions. The result was the development of both Apps and APIs under Guided Outcomes (GO) for Investment Pathways. These have been designed to enable pension providers to provide a completely digital investment pathway experience to customers. Outcomes focused projections give consumers an immediate view of their potential retirement income with each of the four pathways. Customers can see what each investment pathway option would mean to them in terms of their own retirement income, with personalised longevity forecast and guidance on sustainable drawdown rates also available.”
  

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