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27th Mar 2016
Although the document is termed as the Final Report of FAMR in many ways it is simply an interim statement. All of its recommendations seem to lead to further consideration by the key parties which will inevitably lead to more consultation and further delay in achieving clarity in a number of the key areas. That said the overall direction of travel set out is generally positive provided we see the appropriate carry through of the recommendations.
CTC has set out its comments below under 3 main headings:-
• Guidance vs. Advice
• Robo Advice
• Pensions Dashboard
Underlining the whole FAMR report would appear to be an acceptance that there is a significant advice gap, and it can only be met through relatively extensive change to the current model. And it is only through the extended use of technology that such change can occur.
FAMR accepts the need for greater clarity in this area but all will depend on the results of the FCAs clarification of terminology and, in particular, a clear understanding of the point at which general guidance turns into a personal recommendation. CTC believes that firms need to be able to offer their customers a single, simple, straightforward journey:-
• starting from where they are now,
• a review of their options, leading to
• the decisions they need to make, and ultimately into
• implementing those decisions by way of product purchase or change within the framework of an existing product.
This means firms will need to accept that, in future, they are crossing the advice threshold and need to understand the potential liabilities such a change represents. Providing all the information and then saying to the end customer “now it’s up to you to make a decision” is not what most customers are looking for.
FAMR clearly accepts that increased use of technology provides the key to success in this area. CTC firmly believes that technology already exists that can assist in every stage of the advisory process. The recommendations relating to the Pensions Dashboard (see below) and the sharing of Fact Find information will speed this process.
Technology can help consumers through the journey primarily for the following reasons:
• Readily scalable to the mass market
• Ensures consistent approach
• Responsive to mass of data collected
• Trusted by consumers when it makes them feel in control
CTC recognises that technology does not provide 100% of the answer and best approaches should integrate with helplines, chat facilities and options for face2face contact. But we certainly believe that improved use of technology can cut costs in up to 90% of situations. This is the case not just for customers needing streamlined advice but also those situations where a more holistic view is needed.
CTC has been working on intelligent automation that engages with customers in a responsive way; going beyond ‘decision trees’ to create a more dynamic situational analysis. So that profiling customers through Attitude to Risk and Capacity for Loss can be explored in a meaningful way for customers with results that make sense to them. Making is comfortable for the customer will lead to a picture on which it is possible to give personal recommendations.
This approach could provide an adequate Suitability Report, potentially without the need for face2face contact or telephone support. It is to be hoped that the proposals made relating to Project Innovate will welcome the use of technology to a greater extent than has necessarily been the case from the FCA in the past.
CTC particularly welcomes the suggestion that Suitability Reports should be improved and shortened. CTC is already able to provide the technology to cut time involved in preparation and make them consistent. It will also be necessary for the FCA to play their part in this because historically much of the information contained in Suitability Reports is included through fear of subsequent regulatory challenge, “if in doubt leave it in” would be a common compliance mantra.
CTC welcomes any initiative that more readily provides the essential information for awareness and as a start to retirement planning. It is to be hoped that information relating to the broader spread of asset types (particularly ISAs and the new Lifetime ISAs) that can be considered as part of a customer’s overall asset base should be included in the Pension Dashboard initiative .
For CTC’s part, the ability to use such data is already in our illustration and planning tools; the ability to accept such starting information (from a dashboard) in electronic form is a small step. Indeed CTC was involved in a government sponsored project some years ago which looked to combine government pension forecast information with data relating to private pensions. There was much in that initiative which could be carried forward.
CTC is disappointed that of all the suggested timelines within FAMR the Pension Dashboard has been given the longest – until 2019 as a target. CTC agrees with a number of commentators that much quicker progress is attainable and desirable. In this respect CTC believes that the problems do not largely lie in the insured defined contribution market (or even with the smaller SIPP providers), but much more so in obtaining information from the occupational pensions sector, particularly in relation to defined benefit schemes where there is little or no standardisation in the provision of benefit or transfer data. It is CTC’s hope that the industry forums already meeting can quickly provide the necessary foundation for the Pension Dashboard which the larger players can quickly support but ultimately CTC suspect that it will require slightly more than a regulatory “nudge” to gain full coverage.