Expert: Paul Hogg, Senior Business Development Manager at EV. Facilitator: Joseph Marti, Associate Director, Alpha FMC
Headlines:
- Advice on pension drawdown would not be inhibited by more full risks analysis but there are greater obstacles and higher priorities to solve to improve client experience and outcomes
- Vulnerable client monitoring and support disproportionately impacts those seeking pension advice. It is a complex but critical dynamic to the adviser-client relationship and requires a flexible response
- Consumer Duty is fast approaching, maintaining levels of regulatory pressure across advice. It heightens the impact on the documentation and evidence of advice and paves the way for potential disputes across the product distribution chain
- Client and advice technology still carries significant challenges particularly for those using multiple vendors to support requirements. The lack of universal connectivity and the practicalities of real-world implementations would benefit further analysis
Context
Across the client-advice spectrum, drawdown planning remains one of the most sensitive and keenly monitored. There is still room to make the advice process more systematic, informed by a greater array of factors and in-depth analysis, but other considerations weigh heavier on decision-makers’ minds, which are explored in more detail as follows:
- Client Experience
While capabilities and technology open up new avenues, many delegates indicate more fundamental elements to improve the way in which client experience – particularly during advice – is delivered.
Suitability presents an ongoing challenge in the time taken to construct, balancing swathes of baseline content and disclaimers against the more particular requirements reflecting client-by-client nuance. The group has high confidence in their advisors and quality of advice, but see more practical challenges to ensure evidence and documentation remains watertight. For those operating at scale, it remains central to deliver 'mass customisation' through process and technology to balance potential challenges, operate compliantly as well as in the best interests of the client.
While not ignoring the opportunity for more detailed and sophisticated risk analytics to construct drawdown analysis, more fundamental opportunities are available to improve service.
- Vulnerable Clients
There is wide consensus over the importance of heightened, vulnerable client awareness. Not only did the discussion reflect the importance of training and the multifarious complexities this brings, but also identified the ongoing and periodic nature that creates a perennial need for it. It confounds a simple and binary yes / no status but requires an ongoing and thoughtful approach by the adviser to recognise client events or circumstances that can lead to the need and, as required, break commoditised service types and formats to ensure the right style of engagement.
It was also observed that more full engagement with ‘the family’ – while not always achievable – mitigates some risk as it opens up wider avenues to ensure individuals are suitably protected (notwithstanding the opportunity to offer smoother succession journeys) and operate in a trusting partnership with the adviser.
- Consumer Duty
Regulatory scrutiny remains a key consideration throughout the advice journey. The impact of Consumer Duty will have varied impact by firm, but it is a notable element of regulation given the sensitivity of the subject, the reminder yet again of client suitability and welfare at the front of the regulator’s mind and the limited time to respond.
Consumer Duty further highlights the importance of communication and reporting throughout the product manufacturing and distribution journey and it is plausible it could bring about tension between parties in the event of a dispute as each seeks to minimise exposure to penalties.
Most delegates are unlikely to change the fundamentals of the advice given, such is the confidence in the quality of advice their advisors provide and their client-first approach. Instead, the expectation is to emphasise capturing and providing evidence for the advice, thus further refining the documenting process to prove why it is right for the client. While for some delegates this means updated processes and training, others did not dismiss dedicated or updated technology to support compliance.
- Advice technology
The benefits of embedding greater statistical analysis to inform the advice on pension drawdown was not lost. As the departure point for this roundtable, it was agreed that the high degree of sensitivity to a number of market risks (including drawdown, sequencing, inflation, etc.), not to mention the importance of risk and compliance sensitivities, means that any opportunity to furnish advisors with ways to deliver the best outcomes possible, at scale, has significant merit.
However, a significant challenge emerges in the propagation of advice technology to support individual components of the end-to-end process and the limited degree of integration possible in the real world.
Key takeaways:
- Ultimately, not all APIs are created equally and for those opting for a best-of-breed and multi-solution approach, it is difficult to avoid broken and dog-legged processes.
- This introduces a level of caution in adding a further advice tool into the mix.
- While no unanimous agreement was reached to mitigate this discontinuity (outside of avoiding multi-technology architecture altogether), providing evidence of identifiable and live integrations before committing to implementation offers a step in the right direction.
- Regardless, it remains a real obstacle, and efforts dedicated to unpicking it will occupy the industry for a period yet.
