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FSA scrutinises drawdown advice

The FSA has written to IFA firms to determine the quality of advice being provided to clients taking income drawdown.

In April, the Government abolished compulsory annuitisation and introduced a new capped and flexible drawdown regime.

The regulator has contacted IFA firms which conduct income drawdown business outlining plans to review the quality of advice being provided and determine whether account is being taken of the rule changes.

Companies have been asked to complete an electronic questionnaire by November 30. The FSA will then decide whether further action is required.

An FSA spokeswoman says: “We have written to firms about income drawdown products following the change of rules in April this year.

“We are now looking to monitor any trends since the new rules were adopted.”

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. Why does this article remind me of the back ground music to the film “Jaws”!

  2. Another mis-selling opportunity ?

  3. It’s a bit like ‘mock the week’.
    They spin the wheel and see what topic comes up.
    A never ending series of invented jobs.
    What a bunch of wasters.

  4. If there are robust procedures in place at recommendation at outset and on reviewing drawdown plans then there should be little to worry about.

  5. Whilst I agree with Thomas comments above, it is a pity the FSA do/did not put as much visible effort in to bank and the big boys oversite. It does rather look like rearranging deck chairs in the titanic…. Their chairs may well have needed re-arranging, but………………….

  6. But shuurely those who want to (or need to) will complete the questionnaire as if everything is hunky dory, so as I see it, it’s a complete and utter waste of time and effort (again), this won’t catch anybody who doesn’t want to be caught. Why doesn’t the FSA do something useful for a change? Oh, I know why – it’s because they don’t have the foggiest about what IFAs do and just work to their own ivory tower agenda.

  7. Now,all you qualified, fee based, financial planners,what did you do with this opportunity?
    Are you checking your PI?
    Are you making sure you cover your a…se?
    How much did you charge your clients for this advice?
    I am sure you checked it all carefully with your ‘business prevention’ compliance consultants.

  8. The trouble is there are to many mouths to feed at the FSA.

  9. The reality is, like it or not, the FSA are doing their job…horizon scanning for potential problems. (Pity the horizon was a bit foggy when the banking crisis was looming!!)

    The other reality is that the majority of IFAs who specialise in this niche area have to have sufficient knowledge and expertise, backed up by relevant qualifications. The T&C regime in which they operate is more rigid, as is the requirement for prescriptive disclosure requirements. This extends to their suitability letters and ongoing calculations as to drawdown limits.

    I am not talking about the ‘cowboys’ who advertise and prey on the vulnerable – they may just get their just desserts.

    My view is that the HL type firms will come under greater FSA scrutiny simply due to the business volumes. Professional IFAs should not have much to fear.

  10. Because so much has changed from “B” Day on 6th April does it make sense to take a fresh look at the Drawdown review process and the following in particular?

    1. If the new rules make Drawdown more or less attractive (could be more attractive if you’re over 75 and want to pass on capital, could be a lot less attractive if you’re 67 and the amount of sustainable income you can take is your main priority?)

    2. If an annuity is now part of your needs? – Particularly if you can qualify for an enhanced rate – post 6.4 a rate of income of say, 7.0%+ may now be a lot more attractive than it was following the fall in GAD rates and market volatility? So should health and qualification for an enhanced rate be asssessed annually at every review for example?

  11. I agree with Gazza and Anon Oct 27th.

    The PIA reviewed drawdown/pfw back when it was not even known as USP.

    The key is documentation and consideration of issues on a regular basis.

    As ever if its not written down it did not happen!! The regulator can of course rewrite the rules.

    There is always a danger that clients draw far too much income and that advisors spread their own knowledge over far too many area’s.

  12. Same old problem, i’m a financial adviser and do everything! My area is this and today a general client asked about mortgages, I referred it on as it’s not my area. Time to pay fees for profession advice in specialist areas. A review should incorporate current values, objectives, health, future
    needs, annuity rates and third way options.

    Rant over folks

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