The FCA has said it is "unlikely" most advice firms would comply with some requirements of consumer duty without taking action, following its retirement income thematic review.
In a Dear CEO letter, published alongside its thematic review on retirement income this morning (March 20), the regulator promised to carry out more supervisory work into the retirement income advice market to identify the scale of the issues.
As the consumer duty was not introduced at the time the review took place, the FCA did not consider files against the requirements of these rules.
But in the letter, the FCA said: "We note that it is unlikely that most firms would comply with some requirements of the duty without taking appropriate action to address our concerns."
Among the consumer duty principles the FCA highlighted in particular was the the retail outcomes rules and guidance on firms’ conduct in relation to products and services, price and value, consumer understanding and consumer support.
The FCA said it would follow up on the findings of its review more generally with firms involved in the retirement income advice market and take action where necessary.
When looking at where firms could improve, the FCA found five key areas:
- it found the approach to determining income withdrawals was applied without taking account of individual circumstances, or based on methods and assumptions that were not justified or recorded
- risk profiling was not evidenced, was inconsistent with objectives and customer knowledge and experience, or lacked consideration of capacity for loss
- there was also a failure to get necessary information about customers to demonstrate advice suitability.
- the periodic review of suitability, where relevant, was not always delivered to customers that had paid for ongoing advice .
There were also inaccurate or insufficient records held to enable customer outcomes to be assessed and track whether periodic review services were delivered.
The FCA said: “Advisers have an important role in helping consumers make the right decisions and secure good outcomes. We ask all firms to ensure their advice process complies with FCA requirements on information collection, suitability and disclosures.
“They must also ensure they have adequate systems and controls and monitor customer outcomes.”
amy.austin@ft.com
