I have written before about the investment pathways and why they make little or no sense for someone that is in a Bespoke SIPP but still it is something that providers are going to have to deal and provide solutions for.
Communicating with non-advised clients is something that most providers take great care with, they don’t want to be seen to be leading or straying into the advice market in any way. It was a real concern that by providing investment pathways providers could be seen to be responsible for leading the client to these pathways instead of another option.
The FCA has confirmed in its policy statement that they “think” providers can offer investment pathways without it being seen as a personal recommendation. Even if they are not seen as a personal recommendation, investment pathways must be given at least equal prominence as other options or even the option to remain as they are. This could easily lead a client to believe that the alternative use of an investment pathway is better for them. In addition, should the consumer choose not to take the option of an investment pathway then they must be reminded of their availability again before their own investment choice is implemented, or in many cases not changed at all.
The other issue that is going to impact a lot of the drawdown market, especially in the SIPP arena will be the easement that is in place for those with less than 500 non-advised drawdown clients each year. This isn’t as simple as just not having to offer investment pathways or just state that another provider may offer them as an option.
It is a case of signposting the client either to another provider or to the Money and Pensions Service drawdown comparator tool. The second option is likely to be preferable to referring to another provider, referrals to another provider would come with significant due diligence and again the ceding scheme could be seen to be recommending a transfer. If the ceding scheme could then be held responsible for this referral isn’t clear.
Overall, I feel that the investment pathways are only likely to be entirely appropriate for a few who fit nicely into the four boxes determined by the FCA. More likely is that it will create more paperwork especially for those engaged but non-advised consumers who want to make their own investment decisions into their retirement.
Claire Trott, Chair of the Association of Member-Directed Pension Schemes