The letter comes following the FCA’s thematic review of retirement income advice which examined how firms were providing advice.
The review identified examples of good practice in the market with some firms showing they had considered their customers’ needs and designed their advice model in a way likely to lead to good outcomes. Some firms had clearly detailed processes, specific training on decumulation and used a range of tools to help illustrate complex information for customers.
However, the FCA also found some examples where firms were not taking account of the needs of their customers. This included where firms operated in a way unlikely to lead to good customer outcomes by not considering a sustainable level of income to support retirement and some instances of firms not providing the right information to customers. Most of the advice files the FCA reviewed showed advice provided was suitable. However, in a small number of instances recommendations resulted in consumers losing guarantees or incurring unnecessary charges.
Sarah Pritchard, Executive Director of Markets and International, at the FCA said: 'Financial advisers have a vital role in helping consumers to make the right decisions now to support them long into the future. Decisions for consumers approaching retirement are complex, with the potential for risk. We want to support a sector that can help consumers access pension benefits, invest with confidence and have a sustainable income when they retire.
'Some firms are getting this right and making a real difference to their customers. However, others are not even getting the basics right and putting their customers’ futures at risk. We urge all firms to take on board our findings and review their own processes. Where they do not, we will act.'
To help firms the FCA has published a Retirement Income Advice Assessment Tool (RIAAT) and accompanying instructions. This tool shows how we assessed advice files and shows how firms can assess if their advice is compliant with our rules, including the Consumer Duty.
The FCA has also published the Cash flow modelling article which will help firms when undertaking modelling.
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