Retirement Income Advice Shifts and FCA Innovations

Unknown Speaker

Hello and welcome back to the B-Compliant Podcast! I’m Vicky Pearce, and as always, I’m joined by the ever-enthusiastic Rachel MacRae. How are you doing today, Rach?

Rachel MacRae

Oh, I’m good, Vicky! I’ve had about three cups of coffee already, so I’m buzzing. And I’m actually quite excited about today’s topic, which is a bit sad, isn’t it? But, you know, retirement income advice—there’s a lot to unpack.

Unknown Speaker

It’s not sad at all, this is exciting feedback in the world of compliance! So, let’s dive in. The FCA’s just published their findings from a review of 28 firms giving retirement income advice. There’s some really interesting stuff in there—good and bad, as you’d expect. They looked at how firms collect client information, risk profiling, and whether clients’ income withdrawals are actually sustainable.

Rachel MacRae

Yeah, and what stood out to me was how some firms are smashing it with their fact-finding. Like, they’re not just ticking boxes—they’re properly documenting assets, income sources, future goals, all that. Some even have these decumulation registers, which, I’ll be honest, I haven't seen used as much. They’re tracking things like risk tolerance, age, vulnerability, and even provider mix. That’s next-level stuff.

Unknown Speaker

Absolutely. But then you’ve got the other end of the spectrum, haven’t you? Some firms are still using risk assessments that haven't been updated in years. Or they’re missing key bits of KYC—like, they don’t have a full picture of the client’s liabilities or income. It’s a bit worrying, really, especially when you think about how quickly people’s circumstances can change as they approach retirement.

Rachel MacRae

Yeah, and the FCA’s really pushing for a more tailored approach to risk profiling now, especially for clients in decumulation. So, not just a one-size-fits-all questionnaire. The best firms are using bespoke questionnaires, and they’re actually reviewing those risk assessments regularly. Plus, they’re doing things like market stress testing to see how clients might cope if things go a bit pear-shaped.

Unknown Speaker

That’s it. And I think the stress testing bit is so important. I mean, it’s all well and good projecting income, but if you’re only looking at average life expectancy, or taking the client at their word that they won't overspend you’re missing a trick. People are living longer, and spending more, so if you don’t stress test those models, clients could run out of money which could lead to complaints. Some advisers are using dual cashflow systems to cross-check their outputs, and they’re integrating tax planning into the mix as well. That’s proper holistic advice.

Rachel MacRae

Yeah, and on the flip side, the FCA found some firms couldn’t even justify the assumptions behind their cashflow models. Or they weren’t updating them after big life changes. That’s a recipe for trouble, isn’t it? I mean, if you’re not keeping things up to date, how can you be sure the advice is still right for the client?

Unknown Speaker

Exactly. And the FCA’s message is pretty clear: firms need to review their processes, benchmark against these findings, and make improvements where needed. It’s not about reinventing the wheel, but it is about making sure you’re not leaving clients exposed. If anyone listening wants help benchmarking their own processes, you know where to find us!

Rachel MacRae

So, moving on, let’s talk about the FCA’s new Investment Advice Assessment Tool—the IAAT. I love a good acronym, don’t you, Vicky?

Unknown Speaker

Oh, I do. The IAAT is designed to help firms benchmark the suitability of their investment advice—though, just to be clear, it doesn’t cover retirement income or DB transfers (those are still covered by the RIAAT). It’s just for personal investment advice and related disclosures.

Rachel MacRae

Yeah, and the FCA’s saying, look, you don’t have to use it, but they’re definitely encouraging firms to give it a go. It’s a way to self-assess past advice and make sure it meets current expectations. There’s even a guide to help you get your head around it, which is handy if you’re not sure where to start.

Unknown Speaker

And it’s not just for ticking boxes, is it? It’s actually a really good way to prepare for regulatory scrutiny, or if you’re dealing with complaints or doing a past business review. The FCA’s basically saying, use this tool to see if your advice stacks up—and if it doesn’t, you’ve got a chance to put things right before they come knocking.

Rachel MacRae

Exactly. And I think it’s worth saying, even though it’s not mandatory, if the FCA’s recommending it, it’s probably wise to at least have a look. It’s all about showing you’re aligned with their expectations, isn’t it? And if you get stuck, they’ve said you can get in touch for help. So, no excuses, really!

Unknown Speaker

No, none at all. We've already reviewed it to ensure that our file review process meets the expectations in the IAAT (which to be fair they already did, but then compliance is our bread and butter). So if you want a bit of extra support, you know, we’re always happy to help firms work through it. It’s better to be proactive than reactive, especially when it comes to compliance.

Rachel MacRae

Right, let’s wrap up with some of the latest market developments. The FCA’s quarterly consultation paper is out, and there’s a lot in there—decommissioning some returns, changes for cryptoassets, and, my favourite, the new PISCES platform for private share trading. It’s a bit of a mouthful, isn’t it?

Unknown Speaker

It is! But it’s quite a big deal. This new platform is going to let shares in private companies be traded during set events—so, like, monthly or quarterly. It’s aimed at institutional and high-net-worth investors, not the general public. The idea is to give more liquidity to private markets, which is something the UK’s been trying to improve for a while.

Rachel MacRae

Yeah, but what caught my eye was the lighter disclosure regime. So, companies won’t have to provide forward-looking forecasts or sustainability info, which is a big shift from public markets. I get why they’re doing it, but it does raise some compliance questions, doesn’t it? Like, how do you make sure investors still get enough information to make informed decisions?

Unknown Speaker

That’s a good point. The FCA’s said there’ll still be material business info, and companies can disclose more if they want, but it’s definitely a different risk profile. And some of the usual public market protections won’t apply, so it’s a bit of a watch-this-space situation. They’re running it as a sandbox for five years, so I suppose we’ll see how it pans out.

Rachel MacRae

Yeah, five years should give them plenty of time to iron out any issues. And that’s probably a good place to leave it for today. There’s a lot happening, and we’ll be keeping an eye on all these changes as they develop. Vicky, thanks for your insights as always—it’s been a pleasure.

Unknown Speaker

Thanks Rach! And thanks to everyone for listening. We’ll be back soon with more updates, take care!