What the FCA is looking for in its retirement income advice study

While no doubt a time-consuming exercise for those responding, stepping back and reviewing the questions as a whole is revealing in terms of areas of FCA interest, including many cross-overs with the consumer duty.

Timing

The watchdog is carrying out this review over a period that straddles the key “go live” date for the consumer duty of July 31, and ahead of this date many companies have been reviewing their practices and advice services.

The hard data for the retirement income advice study is for the 2022 calendar year, but many of the questions ask for information on a company’s current approach.

To ensure responses are meaningful and forward looking, I trust advisers will have allowed for consumer duty changes made when answering. 

Here, I will summarise the various elements of the survey to illustrate areas of FCA interest in this key market.

In places, advisers are offered a range of multiple-choice answers and these are likely to give clues as to what the FCA might consider best, as well as not-so-good, practice.

Lifetime lending

Perhaps surprisingly, the survey starts with some questions on a less mainstream aspect of retirement advice, namely whether companies advise on lifetime lending — specifically, interest-only mortgages and equity release.

The FCA asks if this is offered by an adviser as part of retirement income needs alongside annuities or drawdown. Alternatively, is it offered by those individuals advising on other mortgage products?

The hard data for the retirement income advice study is for the 2022 calendar year, but many of the questions ask for information on a company’s current approach

There are also questions around whether the company takes a different approach here to remuneration, monitoring or supervision.  

This suggests the regulator is keen to understand the extent to which income that can be generated from property is being considered alongside more traditional retirement income solutions.

The ongoing availability of commission on lifetime lending solutions also looks to be of interest.

Target markets

This section returns to more expected territory, exploring whether companies set target markets for decumulation advice. It asks if the design of distribution strategy takes account of customers’ needs, objectives and characteristics, with vulnerabilities called out specifically.

These are all key requirements of the consumer duty, so hopefully adviser companies will have been able to answer affirmatively. 

When were models last reviewed and what are the most common objectives of the company’s target market? Also, what are the key characteristics — for example, high net worth or retail customers more generally?