Drawdown advice needs 'sharpening of rules, not probe'

She said: “No adviser should be recommending any product on the basis of picking up ongoing fees. All clients should be fully educated on their options and the value of income security at retirement.

“Planning should be carefully considered, over a reasonable period of time in the run up to their retirement - not rushed through at the last minute.

“Trusted client relationships are integral to a healthy advice market and where fees are taken from decumulation products, an adviser should be able to demonstrate added value.”

But she agreed consolidators could be contributing to the focus on revenues rather than what is best for the client. 

Ms Hall said: “There is the opportunity for conflicts to arise when a business is concerned with its Aum figures, rather than the client outcome. The way in which firms are bought by consolidators contributes to this.

“Companies need to be more transparent about what retirement products they can and cannot advise upon, clients can make informed decisions about whether this is a holistic service.”

Meanwhile Alan Chan, director and chartered financial planner at IFS Wealth and Pensions, said advisers should be made to review their drawdown advice each year to assess its suitability.

Mr Chan said: “Advisers must always consider the suitability of a product to the client first and foremost, without regards to ongoing fees. This is true in any area of financial area not just pensions. 

“Likewise, drawdown must first be suitable for the client and this has to be reviewed each year to consider the continuing suitability of the product and merits of an annuity instead and the clients’ views.”

Mike Lacey, principal at Bowman Pension Consulting, was concerned the FCA’s probe may undermine the need for ongoing advice on drawdown.

He said: “Fees are pretty transparent nowadays; not only are they expressed in percentage terms, but they are also expressed in actual monetary figures. Clients know exactly what they will be paying, and advisers should be able to justify this.

"I would feel hugely uncomfortable if a client asked me to put them to a product such as drawdown and refused to engage me for downstream advice. There are just too many variables and too many opportunities for clients to simply get it wrong.”


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