Platform decumulation delusion puts advisers at risk

Platform decumulation delusion puts advisers at risk

Platforms declining to offer the full range of pension withdrawal products with only drawdown widely available, is putting advisers at risk of claims they are not acting in the best interests of clients. 

Consultancy firm the Lang Cat found just 53 per cent of advisers use a platform specifically for decumulation, that is to enable clients to manage the withdrawal of their retirement savings.

The Lang Cat’s founder Mark Polson said that what made this particularly disappointing was the fact some of the most popular platforms did not offer “the most basic features” for decumulation.

He said things became “even more worrying” when advisers were asked if their platform of choice had full decumulation functionality, with 93 per cent incorrectly saying it did.

Mr Polson said: “We’ve shown that the range of decumulation functionality on many is limited, but the overwhelming belief or perception is that this isn’t the case.

“Are some firms ignoring any evidence that doesn’t support their platform selection case? That there were very few comments on this matter is perhaps revealing.”

Among the worst performers, according to the Lang Cat’s analysis, were Nucleus and Alliance Trust Savings, which were missing seven of the 11 features the consultancy firm asked about.

The former did not provide uncrystallised funds pension lump sum (UFPLS), tax-efficient withdrawal tools, a consolidated drawdown pot, portfolios designed for drawdown, guaranteed income products, outstanding allowance reports and consolidated income payments.

Alliance Trust Savings did provide UFPLS but did not provide natural income options.

Aviva’s platform was missing six features, including guaranteed income products, natural income options, portfolios designed for decumulations and UFPLS, while Cofunds was missing five.

Both Standard Life Wrap and Transact provided all 11 features.

Rory Percival, a regulatory consultant and former technical specialist at the Financial Conduct Authority, said advisers were risking falling foul of the rules by not using a well-designed platform with all the necessary features for decumulation.

He said: “It doesn't surprise me. In general I think advisers do not adequately consider their client banks, segment and design investment solutions and advisory services to suit their client segments.

“I think the use of the same platform in decumulation as they do in accumulation is a good example of this.

“The platform is something where the status quo bias is most likely to play out because most of the benefits of using it sit with the advice firm, and not with the client so the inclination to use the platform which works for them is quite strong.”

He said advisers could fall foul of rules aimed at making sure they consider their clients’ best interests, rather than suitability rules, since the platform is a service not a product.

The Financial Conduct Authority has previously raised concerns about advisers using only one platform, saying it is "unlikely" firms will be able to meet the independence rule while doing so.

Elsewhere in its research the Lang Cat also asked each platform a series of questions, including whether one regular consolidated payment can be made to the client from across all wrappers.