The Financial Conduct Authority (FCA) should delay the implementation of its investment pathways initiative in light of the Covid-19 pandemic, AJ Bell chief executive Andy Bell has said.

In its ‘Dear CEO’ letter, published yesterday (31 March), the FCA stated that the rules for investment pathways “are already made” and that it had referred the initiative to its board for further consideration.

Firms and trade associations had asked for clarification on the implementation deadline for the measure.

In response, Bell stated that it was “not too late for an immediate delay” of the initiative “to give time for a fundamental rethink of what they are trying to achieve and the best way to implement them”.

“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,” he warned.

“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.”

As part of the initiative, drawdown providers will have to give consumers entering a drawdown product, that haven’t been advised, four options for how they might want to use their drawdown pot.

Drawdown providers will also have to ensure that non-advised consumers entering drawdown invest wholly or predominantly in cash only if they have taken an active decision to do so.

They must give warnings to those consumers who do decide to invest in cash, as well as those already in cash when the rules and guidance come into force.

Pension providers must also give consumers in decumulation annual information on the costs and charges they have paid on their pension pot, expressed as a single pounds and pence figure.

This includes both advised and non-advised consumers who are either in drawdown or who have withdrawn at least one uncrystallised fund pension lump sum payment.

Bell continued: “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.”

The FCA recently announced that it had delayed the implementation of its proposed changes to defined benefit (DB) pension transfers by up to six months.

The implementation of proposals to reform DB transfer advice, including plans to ban contingent charging and introduce abridged advice, had been expected “in the first quarter of 2020” following an industry-wide consultation, but are now expected in either Q2 or Q3.

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