The real risk here comes from customers perhaps making decisions that are not sustainable, regardless of how they have been advised, and fully setting out what was discussed and decided upon may be key if such decisions lead to financial difficulties.
Additionally, what is suitable for someone now, may be completely different a decade or two down the line.
A retirement income strategy in 2024 may look wildly different and be potentially unsuitable in 2044. Does that mean it wasn’t suitable at the time? Not necessarily.
However, advisers may be criticised if they haven't considered appropriate diversification and haven't allowed for changes in circumstances.
This also highlights the need to assess whether a customer's arrangements are suitable on an ongoing basis (something the FCA will expect under the consumer duty).
Advisers will also want to ensure that they are able to evidence the advice provided – providing the most suitable advice may not be sufficient to defend a claim if the adviser can't evidence what was actually said.
Of course, the FCA will expect advisers to also comply with their regulatory obligations, including the FCA's consumer duty.
Indeed, it noted in the 'Dear CEO Letter' that while it didn’t consider files against the requirements of the consumer duty, it anticipates that most firms would fail to currently comply with the requirements without taking further steps.
Going forward the FCA is less likely to be as forgiving.
Nobody is saying this is an easy process and advisers need to tread carefully if they are to navigate the changing landscape of retirement income advice.
However, it's not all doom and gloom; the FCA appears keen to provide assistance to the sector to ensure improvements are made. Advisers can't bury their heads in the sand and should address any failings they may have sooner rather than later.
David Allinson is partner and Ash Daniells is senior associate at RPC
