AJ Bell  

FCA warned against investment pathways for Sipp clients

FCA warned against investment pathways for Sipp clients

Andy Bell has written to the Financial Conduct Authority to warn that non-advised self invested personal pension clients will not want investment pathways forced on them.

In the letter Mr Bell, the chief executive and co-founder of investment company AJ Bell, called on the regulator to not make it a requirement for drawdown providers to offer investment pathways to all clients but instead focus this service on those who are 'disengaged' from their investments.

As part of its latest work on retirement the FCA proposed pension providers offer their non-advised customers a choice of investment pathways to meet their retirement objectives.

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This was after it found many consumers were solely focused on taking tax-free cash from their pensions and were "insufficiently engaged" with deciding how to invest funds that moved into drawdown.

The new rules will also apply to Sipp providers which have more than 500 non-advised clients going into drawdown each year, which some believe could see some operators more focused on advised consumers withdraw these services from the market.

Mr Bell wrote: "Most non-advised Sipp customers have a clear view of what their investment strategy already is, or will be, once they enter into drawdown and will not appreciate investment pathways appearing to be forced on them.

"Sipp scheme holders tend to put large amounts into their pension and therefore have a strategy of what investments they want to make with their money once they enter into drawdown."

Mr Bell explained that the journey for a non-advised Sipp customer entering drawdown was different from a customer with an insured personal pension and if AJ Bell were to change its non-advised drawdown process as proposed by the FCA this would create an "unwieldy customer journey".

Instead he has proposed that investment pathways are targeted exclusively at non-advised customers whose actions, or lack of, indicate that they are "disengaged".

Providers should not have to offer pathways until clients have remained invested largely in cash for a specified period of time after entering drawdown, which Mr Bell suggested should be three to six months.

But Andrew Tully, technical director at Canada Life, said: "Once companies start carving bits out of the FCA’s requirement to suit a particular client, soon everyone will start to follow suit and do the same.

"They must either follow the requirement and offer investment pathways to all non-advised clients as set out by the FCA consultation with the option for people to opt-out or there is no point in having investment pathways at all."

While Jon Greer, head of retirement policy at Quilter, agreed with Mr Bell that investment pathways should be focused on the disengaged, he warned that they should not put people off of seeking professional advice and building a tailored investment.

He said: "[Investment pathways] should not be seen as an alternative to making an informed choice and building a bespoke plan at retirement. Instead, they ought to serve as a back-up for those that don’t take action.