The Financial Conduct Authority’s investment pathways is a good step for helping non-advised customers achieve better outcomes, experts say.
This is the view of Abrdn head of savings policy Alastair Black regarding the FCA’s investment pathways: Post implementation review, which was published yesterday (11 July).
The review stated that investment pathways “are working as intended to address the specific harms” of people accessing their pension without a financial adviser.
Investment pathways were introduced following the FCA’s Retirement Outcomes Review (ROR) that looked at how the retirement income market has evolved since the pension freedoms were introduced in April 2015.
The ROR final report was published in 2018.
The FCA added that investment pathways are “working as intended to address the specific harms identified in the ROR”.
The FCA is working closely with the Department for Work and Pensions (DWP) and The Pensions Regulator (TPR) across the pension market. The FCA is also working with the Treasury on the advice/guidance boundary review.
The regulator said: “Investment pathways support non-advised consumers to align their drawdown investment with their retirement objectives, with a focus on consumer choice.”
Investment pathways were first implemented in February 2021.
Data from the Association of British Insurers (ABI) showed pathways take-up was at 50% in Q1 2023.
However, other public data showed that take-up varies “significantly” across different providers.
Black added: “We welcome the FCA post implementation review of investment pathways and agree with the FCA that this is a good step to helping non advised customers achieve better outcomes at and in retirement.
“We also welcome the recognition by the FCA that this is just the start and customers need much more help.
“The best outcome for the majority of customers would be to receive some form of advice and the FCA needs to ensure that it looks at both enhancing the ability of Pension providers to improve guidance but also make it easier for advisers to deliver advice at scale to help reduce the advice gap in the UK.
“Key to this will be supporting innovation in advice models removing the need for unnecessary complexity for those clients where it is not required.”
Quilter head of retirement policy Jon Greer agreed with Black that investment pathways are no substitute for advice.
“While initiatives such as investment pathways make it easier for non-advised savers to choose investment solutions aligned to their specific desires and drawdown objectives, they are no substitute for financial advice.
“Everyone’s financial make up is different as well as their financial objectives, and advice often helps those who live well below their means for much of their retirement unnecessarily by illustrating exactly how much they can afford to drawdown without fear of running out.”
Oh yes? That’s OK then. These ‘pathways’. Do they discuss government failure with money and credit – i.e. inflation – and how to deal with it? Or, what about health questions? Are these pathways going to guide clients without goals?
An economy is a social construct, not a mechanism. People need people. Would you replace a priest or a vicar with a bot? How would a bot discuss and interpret the work of God?
Sigh
Pathways is an American expression to avoid walkways – where everyone is forced down the same route without taking individuals into account. Robots artificial information – or artifiical insemination? Like with profits one size fits all and the removal of our Human Rights to be able to choose
And who will carry the liability for compensating clients if these investment pathways don’t work out the way the client was expecting them to?