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Use postponed review for retirement proposition, says expert

written by Bella Palmer

The Financial Conduct Authority (FCA) launched its second suitability review of advice in January but postponed it later due to the Covid crisis

IFAs should use the FCA’s postponed suitability review of retirement advice to consider their propositions for clients.

In January, the regulator launched its second suitability review of advice but postponed it in May due to the pandemic.

But the FCA also said it will pick up the probe next year and could focus on issues retirement clients faced in the pandemic.

A webinar hosted by the Personal Finance Society looked at the current climate for pension drawdown.

In it, Prudential pension business development manager Kirsty Anderson urged advisers to look hard at how they handle drawdown clients.

She made a connection between the FCA’s guidance consultation paper on defined benefit transfers and the second suitability review.

She said: If you remove DB transfers from it [the guidance paper] and replace it with retirement income advice the same process is required. The same areas the FCA is worried about apply not just to DB transfers but retirement income advice.

What the FCA found was a lack of advisers knowing client information. There are loads examples of good and bad ways of getting to know information about your client in the guidance paper. The FCA have said it has consistently seen advisers talk about client’s objectives but not their income needs, Anderson said.

She said, there are loads of relevant things in that paper to the retirement income process. What stress tests have you been doing and how have you demonstrated that within your firm’s processes for retirement income?

Anderson also urged advisers to make sure their stress tests for drawdown clients is up to date with recent market volatility.

She added: Most advisers who I speak to test clients based on what happened in 2008 yet most were in annuities then. But if we stress test now it should be based on what happens now. The extreme market volatility from the pandemic has happened in a much shorter time scale and more severe extent.


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