FCA puts retirement under the spotlight

The latest announcement from the Financial Conduct Authority (FCA) is welcomed for anyone struggling to balance effective and rigorous retirement planning within the boundaries of guidance currently in play.

Retirement comes in all shapes and sizes; one size certainly doesn’t fit all, and while Centralised Retirement Plans (CRPs) are, at the framework level, useful, the ability to standardise the retirement experience across all is a fantasy. What isn’t fantasy is the ability to apply data, science and digital technologies to ensure ALL clients receive the very best retirement experience they can expect, regardless of wealth, longevity and legacy aspirations.

The boundaries we currently operate within allow for good levels of investigative fact-finding rigour to ensure the advice levers run relatively smoothly. We then apply one-dimensional projections and strategies to all clients and revisit those assumptions on an irregular basis. Imagine checking your bank balance or personal spending strategies once, or twice, a year!

Critically the use of deterministic modelling for income in retirement is that it fails to recognise the impact the sequence of investment returns can have on the longevity of the portfolio, nor consider other factors such as inflation, spending rules, tax, and so on. A 360-degree approach to the retirement experience is what is required. Solutions that aggregate effectively, stress test and apply data-science to decumulation, and then continually monitor real-time the effective success rates of the retirement experience. A centralised framework to deliver the evidence-based rigour but personalised to every retirement case.

By focusing on the suitability of retirement advice, the FCA wants to assess, amongst other things, the sort of decumulation advice that consumers receive. For advisers who have adopted Timeline, you’re already delivering the right levels of rigour and personalisation to the retirement experience that we believe the FCA should aim to prescribe.

What are we / the industry doing to solve it?

The question on all advisers/firms lips right now is how you make the change, adapt quickly and set your clients’ minds as ease.

Timeline is the solution capable of accurately stress-testing and underpinning “robust” retirement experience advice. We are empowering both client and adviser equally and applying over 100-years of empirical data to produce the very best retirement experience to every version of the client. Digital client experience provides the ability for client and adviser to work in harmony throughout the journey. Livetrack automatically reviews and stress test the retirement experience to ensure success rate compliance – real-time!

Ask yourselves, if asked, could you prove to the FCA that your current retirement planning rigour and associated success rates are exceptional? So should the FCA conclude, and of course they should, that firms should be able to demonstrate that they proactively audit retirement plans and their respective success rates? Therefore, a firm that can stress-test and report all decumulation plans successfully, either real-time or by bulk processing is ultimately compliant; Timeline does this every day!

So, Timeline’s core capabilities and values could become the de-facto approach to where the FCA leads us. We certainly hope so, as we believe the current retirement landscape is fraught with inadequacies. Either way, whether it is straight-line projections, a “one size fits all” CRP approach or the simple inability to allow advisors and their clients to be in lock-step in their retirement journey, there is much change required.

To date, Timeline could be considered a “nice to have” solution, but ask yourselves this – Do my firm and I want to be at the very forefront of the retirement experience, delivering auditable and accurate retirement success for my clients? And of course, do I want to do this using a solution that elegantly visualises and engage. We’re sure you do, which is why we believe Timeline is the de-facto standard in retirement experience planning.

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Toyosi is the Pension & Technical Consultant at Timelineapp. His experience is in Financial Services and consulting (“Big-4”). Toyosi has the IMC qualification and is a member of the CFA Society of the UK and the Chartered Insurance Institute. Toyosi is one of our content contributors and is often writing articles on retirement and the sustainable withdrawal framework.

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