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Press comment: Pathways for drawdown - sensible but risky

30/07/2019

If you’re covering the Financial Conduct Authority’s Retirement Outcomes Review which requires providers to offer non-advised consumers ready-made drawdown investment solutions, or investment pathways, please see the following comment from Jon Greer, head of retirement policy at Quilter:

Jon Greer“Almost every policy will have unforeseen consequences. No one has a crystal ball to predict how things will pan out. But the extent of those consequences vary and pension freedoms has seen a tsunami of challenges for the retirement market, which the regulator is still trying to tackle five years later. It has set out a package of remedies that it hopes will manage the myriad of challenges of a policy that was introduced at what seems supersonic speed in the context of policymaking.

“Disengagement is one of the most substantial challenges as a third of non-advised drawdown customers are invested entirely in cash. And this is the rationale at the heart of their suggestion to create investment pathways.

“Indeed, even for those who are engaged, there is a substantial risk attached with DIY investing. Research from Quilter and Boring Money shows that unadvised investors have seven bad habits including exposure to equity investment, a bias towards the UK, lack of asset allocating, not rebalancing and panic selling. These and other mistakes mean DIY investors miss out on 11.3% of potential gains a year. A substantial problem during the accumulation period but devastating when it comes to drawdown.

“So the logic behind pathways is hard to argue with. They encourage people into an investment that is created broadly designed around them and with their needs in mind. However, we cannot ignore the risks that go along with it and must not forget that for many advice will continue to be key as it will ensure an investment plan that is specifically tailored around them.

“A central issue with pathways is that it may become the path of least resistance and people go for a default instead of engaging. The regulator needs to carefully observe consumer behavior and we need to ensure we quash any public misconception that it doesn’t require the customer’s ongoing input.”

For more information contact

Kathleen Gallagher023 8072 629307990 004932kathleen.gallagher@quilter.com
Michael Glenister020 7778 963807469 144535michael.glenister@quilterinvestors.com

Notes to Editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £95.3 billion in customer investments (as at 31 March 2020).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform and Quilter International, including AAM Advisory in Singapore.

The Old Mutual Wealth Heritage life assurance business was acquired by ReAssure Group Plc on 2 January 2020.

Since its IPO in June 2018, Quilter plc’s businesses have progressively rebranded to Quilter, as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Quilter Financial Advisers (previously Charles Derby Group)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Investment Platform in 2020)
  • Quilter International (previously Old Mutual International)

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.