Andy Bell - Fundamental rethink needed on investment pathways

Andy Bell
1 April 2020

•    Dear CEO letter confirms investment pathways implementation is being reconsidered by the FCA Board
•    The letter also announces a relaxation of the rules around customer notifications that are required when discretionary portfolios drop 10%

Andy Bell, chief executive at AJ Bell, comments:

Investment pathways

“If there was ever a case study of why customers going into drawdown shouldn’t be funnelled into a single investment, Covid-19 and the resulting bear market is it. The fact that investment pathways in their current guise are outcome focused and not risk targeted is a major flaw. If they had been implemented six months ago there would be thousands of drawdown customers looking at heavy investment losses with little understanding of why they were guided down a particular path.

“The concern about people holding too much cash in their portfolios looks very different in today’s light. Clearly current events couldn’t have been predicted but they are a timely reminder that bull markets don’t last forever and it is important that people’s investment portfolios are aligned to their personal risk appetite, particularly when they are drawing an income. It is not too late for an immediate delay of the implementation of investment pathways to give time for a fundamental rethink of what they are trying to achieve and the best way to implement them.” 

10% rule

“The 10% rule may be well intentioned but in times of extreme market volatility like we have seen recently the notifications are as useful as slipping a note under a cabin door on the Titanic advising that the shower has sprung a leak!

“They can increase customer anxiety and are a blunt instrument.  The relaxation of the rules is a welcome development and will enable resources to be utilised on more important areas of servicing customers and advisers during the Covid-19 crisis.”

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