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What has happened?

In March 2024, the FCA wrote to the Chief Executives of financial advice firms asking them to review their processes when providing retirement income advice.

What are the key points of the letter?

The letter follows the FCA’s thematic review of retirement income advice, which examined how firms were providing advice.

The thematic review of retirement income advice identified examples of good practice in the market, with some firms showing they had considered their customers’ needs and designed their advice model in a way likely to lead to good outcomes.

However, the FCA also found some examples where firms were not taking account of the needs of their customers. This included cases where firms operated in a way unlikely to lead to good customer outcomes by not considering a sustainable level of income to support retirement and some instances of firms not providing the right information to customers. Most of the advice files the FCA reviewed showed that the advice provided was suitable. However, in a small number of instances, recommendations resulted in consumers losing guarantees or incurring unnecessary charges.

Additionally, in some cases, firms’ risk profiling was not evidenced, was inconsistent with objectives and customer knowledge and experience, or lacked consideration of capacity for loss, there was a failure to get necessary information about customers to demonstrate advice suitability, including expenditure or other financial provision, or future objectives or circumstances, including income needs or lifestyle changes, were not explored. Moreover, the periodic review of suitability, where relevant, was not always delivered to customers that had paid for ongoing advice, and inaccurate or insufficient records were held as the control framework to enable customer outcomes to be assessed and track whether periodic review services were delivered.

To help firms, the FCA has published a Retirement Income Advice Assessment Tool (RIAAT) and accompanying instructions. This tool shows how the FCA assessed advice files and shows how firms can assess whether their advice is compliant with FCA rules, including the Consumer Duty.

The FCA has also published a cash flow modelling article, which will help firms when undertaking modelling. The FCA will be following up on the findings of the thematic review of retirement income advice more generally with firms involved in the retirement income advice market, and it will also be carrying out further supervisory work in this area to explore the scale of the issues identified and tackle any harms.

How can we help you? 

Thistle Initiatives has supported adviser firms for over 10 years as a trusted compliance and regulatory adviser. In addition to assisting firms as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to allow firms to do so. 

Are you looking for help with your retirement advice arrangements, or more general regulatory questions? If so, we can help in any of the following ways;

• Reviewing advice provided, including the use of any cashflow modelling tools and appropriate risk warnings
• Reviewing advice processes and risk tools to ensure that they are consistent with providing good customer outcomes
• Assisting with any remediation that arises from reviewing processes, including any engagement with the FCA
• Providing advice on the use of the FCA’s new RIAAT tool

Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.