In this article, I look at the requirements on providers of non-advised Retirement Pathways and consider how this affects advisers wishing to create their own comparable retirement proposition
Whilst Retirement Pathways are a requirement for the non-advised market, there is a requirement for advisers to compare their recommendations for drawdown to non-advised pathways from an appropriateness and value for money perspective.
This means that it makes sense for advisers to create a comparable retirement proposition.
To do this requires a good understanding as regards the pathways communication process, the four pathways Options, the mandatory wording for the standardised objectives of each Option and the type of solution appropriate for each of those standardised objectives.
Which client segments does it affect?
In the non-advised market, clients start receiving wake up packs from their provider at the age of 50 and every five years thereafter.
Given investors can access their pension from 55, and also given they will receive a wake up pack from their provider aged 50, we think advisers should start having discussions around retirement options with clients aged 50, even if that is just to agree to discuss it in more detail aged 55.
We believe that in any case, advisers should check in regards to retirement options each year with clients from the age 55, as any change in plans for future withdrawals from say, 65, would necessarily result in a change in investment strategy.
We believe that for the segment of clients aged 65 or over, an adviser’s retirement proposition should be the primary proposition discussed with clients.
Whose client is it anyway?
One of the key aspects concerning pathways for advisers is around disintermediation risk. The regulator’s policy intention is that customers who previously had, but no longer maintain an active relationship with an adviser, are offered pathways directly by the provider.
The rules have been amended to remove the need for providers to ask the customers whether they are advised, if the provider has clear evidence as to why they are not.
The regulator does not consider the fact that the customer is paying an ongoing adviser charge to be sufficient evidence that the customer is being advised. Furthermore, if a customer who is paying for advice approaches a provider themselves, this could indicate that they are unaware that they are paying for advice.
This policy position, combined with the requirement for providers to send wake up packs to customers from the age of 50, means the scope for sanctioned disintermediation of advisers by providers is material, in our view.
So the first step for advisers receiving an ongoing adviser charge is to ensure that they have an active relationship with their clients. Advisers may also want to consider working with platforms, which do not go directly to clients.
The four Options