OpinionJun 3 2021

Can we try evidence-based practice in financial services?

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Type ‘evidence based’ into your favourite search engine and there is a fair chance the first result that comes back will be evidence-based practice.

This primarily refers to the common approach used within healthcare of clinicians basing their decisions around a combination of:

  • The best available evidence;
  • Their own clinical expertise; and 
  • The wishes of the patient.

Sounds like a sensible approach to me. It's certainly reassuring to know that the next time I pay a visit to my GP they are unlikely to have taken a look at evidence from research showing that a particular treatment has failed and think 'you know what, I’m going to ignore research showing that this drug doesn’t work when the patient is already ill; I’m going to ignore my own expertise that tells me the treatment will fail because the drug wasn’t administered earlier; and I’m going to ignore the fact that my patient doesn’t like needles, and just inject them with this and hope it works'.

Given that this approach is accepted within the medical world, it is surprising that we do not see it being applied more frequently by regulators in the financial services world. 

Several significant policy initiatives have been introduced in recent years with no testing of how effective they might be, with at least a couple more coming down the line.

One area where regulators should be applauded for having carried out research around proposals is in the stronger nudge towards the government’s pensions guidance services. 

A trial was carried out where three major pension providers attempted to encourage savers to take up pensions guidance either by offering to make an appointment or referring the savers through to Pension Wise to make an appointment for themselves.

The trials had some impact in improving uptake of the pension guidance services, with 11 per cent of customers attending a Pension Wise appointment within the following six weeks, compared with 3 per cent without the stronger nudge.

So, some evidence that the policy will help a small number of people but, bringing this back to the ‘evidence-based practice’ of the medical world, I would not really want regulators in that field approving a treatment that failed to achieve the desired outcome 89 per cent of the time – particularly when the available evidence showed that an alternative treatment could be more effective.

Interestingly, evidence along those lines was actually found in the guidance trial, though it was not referred to within the published results. The providers found that if they offered to make an appointment for customers before they had asked to access their pension, there was a greater uptake. 

Still a minority overall, but more significant than 11 per cent.

I am sure the regulator would argue that the proposals around the 'stronger nudge' are just part of a much wider course of medication. That is a valid argument because other nudges towards Pension Wise do exist, although we have to remember that they have not yet been particularly effective.

What the proposed rules do seem to ignore is that the wider course of medication available to non-advised consumers also includes support obtained from sources other than Pension Wise.

With my customer head on I recently dialled in to an interactive webinar offered by my own auto-enrolment pension provider and found the content excellent – not a substitute for advice, but I would expect the information provided to be on a par with the guidance offered through Pension Wise, which, it is worth mentioning, was promoted many times throughout the webinar.

When the Financial Conduct Authority is considering how prescriptive these rules are, particularly around proposals like imposing delays in accessing pensions if savers opt out of the government guidance, it is important they remember that many savers either will not need external support, or will have obtained it through other sources.

Coming back to the medical analogy, the government is saying people should get a second dose of the Covid vaccine. But, if they have already received pensions guidance from one source, should people really be made to wait to access their pension because they do not want a second dose of guidance from Pension Wise?

Gareth James is head of policy at AJ Bell