Be consistent
The FCA’s fourth finding is that customer understanding is not always supported by the communications clients receive about their cash flow plans.
The regulator highlights examples of firms using different growth rates across different communications, perhaps with one set of return assumptions tied to the risk profile, another to the product provider’s key features illustration and a third underpinning the cash flow plan.
By sticking to one definition of risk and using consistent return and volatility projections across tools and touchpoints, firms can ensure all the communications a client receives can be read in conjunction with each other and compared as needed, without creating confusion.
Review the information
Finally, the FCA reminds advice firms of the need to verify the outputs of their cash flow modelling before they send it to clients, to ensure the information is appropriate and based on suitable assumptions.
In this area the regulator has picked up some simple factual errors – for example, a model relying on pensions being accessed before the minimum pension age – that would have been captured in a quick review.
Cash flow modelling technology that generates robust reporting can support this review process.
Ben Goss is chief executive of Dynamic Planner
