Pension providers urged to embrace fintech before FCA changes

Pension providers should embrace technology and digital solutions in order to rebuild consumer trust before the FCA’s new investment pathways come into force next year, according to the UK fintech company, Abaka.

The digital retirement solutions firm has suggested that AI-powered tools, such as chatbots and intelligent personalised nudges, could dramatically improve customer engagement in retirement planning.

When it published its findings on the Retirement Outcomes Review in July, the FCA said its new investment pathways will mean drawdown providers must give consumers entering a drawdown product that haven’t been advised, four options for how they might want to use their drawdown pot.

Abaka CEO, Fahd Rachidy, commented: “We agree with the FCA’s stated objective to ‘prevent consumers from potential harms leading to lower retirement incomes.' Putting customers’ interests first is the best way to engage with them and rebuild their trust.

“With less than a year to get ready for the FCA’s new investment pathways, providers face the immediate challenge of building new solutions to educate and guide customers into suitable options.

“A reliance on legacy tech to do this, as well as traditional methods of communication like printed mailout packs or phone-based marketing services could prove to be expensive, inefficient and even non-compliant.

“However, by harnessing AI-led digital solutions, pension providers have an opportunity to drive engagement with their clients and help them plan a financially secure retirement.”

The proposed investment pathways, which will come into force in August 2020, followed concerns from the FCA about the 30% of consumers entering drawdown without seeking advice.

The FCA also acknowledged the potential for consumers losing out on better retirement options.

Abaka, however, which works with providers to implement cloud-based digital solutions for customer engagement, said the new investment pathways present more opportunities for the sector than challenges – given the expected growth in the number of pension plans accessed by consumers.

“Everyone deserves a financially secure retirement, but to make that security a reality for many retirees, the financial services sector needs to change the way it engages with its customers,” Rachidy added. “The new investment pathways offer providers a fantastic opportunity to engage with their customers and rebuild trust in pensions.

“They are a chance for providers to take the time to realise their customers’ goals and offer them the guidance and information they need to help them make crucial retirement decisions. That will improve customer trust and loyalty with a provider – and the process could be managed autonomously, and on a mass scale, by an AI-powered platform.”

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