Investment pathways have been introduced by the FCA to help non-advised drawdown customers make better investment decisions.
The ‘pathways’ are a range of ready-made investment options which broadly correspond to one of four retirement objectives.
- Option 1: I have no plans to touch my money in the next five years.
- Option 2: I plan to set up a guaranteed income in the next five years.
- Option 3: I plan to start taking a long-term income within the next five years.
- Option 4: I plan to take out all my money in the next five years.
What does it mean for advisers and their clients?
Although aimed at non-advised customers, the investment pathways process also has implications for financial advisers and their clients.
Definition of ‘non-advised’
The FCA investment pathways rules define a customer as non-advised if the provider has not determined that the customer has received, in the last 12 months, a personal recommendation on either taking drawdown or the transfer from one drawdown plan to another.
If the adviser has set an investment strategy for a customer, but not given them advice on that particular transaction, then the customer will have to be taken through the investment pathways process.
Our benefits forms asks you to confirm that you have given advice to your client on the drawdown transaction to ensure that we do not have to take the customer through the investment pathways process unless absolutely necessary.
Giving investment advice
When an adviser firm is making a personal recommendation to a customer about the investment of the customer’s capped drawdown or flexi-access drawdown funds, then its suitability assessment should also include consideration of pathway investments.
To find out more about this – and the investment pathway process – read our associated adviser guide.
Investment Pathway 1
I have no plans to touch my money in the next five years
Investment Pathway fund: VT AJ Bell Balanced fund Acc IP1
Investment Pathway 2
I plan to use my money to set up a guaranteed income (annuity) within the next five years
Investment Pathway fund: VT AJ Bell Cautious fund Acc IP2
Investment Pathway 3
I plan to start taking my money as a long-term income within the next five years
Investment Pathway fund: VT AJ Bell Income fund Inc IP3