Investment Pathways – A gateway to strengthening relationships with your customer

Shona McCluskey, Alex Shelley

What do we know about human nature? People stick to what they know or are too scared to break the status quo. This is particularly the case when it comes to money. We also know that people are more likely to make better decisions if they feel like they are fully informed of facts, have access to clear information and feel supported along the way.

More people in the UK have a workplace pension or a self-invested personal pension (SIPP) than ever before following the introduction of auto-enrolment in 2012. Despite this, up to 33% of all non-advised drawdown clients opt to invest wholly in cash at retirement (as reported in the FCA Retirement Outcomes Final Report). This large percentage of the population often leave their cash untouched for five years or more following retirement, resulting in loss of potential growth on their retirement income. There is a risk that this could become even more acute in a potential deflationary environment.

Despite the introduction of the Investment Pathways rules (coming into force from 1st February 2021), a significant number of clients may still miss out on investment growth due to their apprehension of getting a major life decision wrong and putting their savings at risk. Investment Pathways is a step in the right direction in helping non-advised clients to make better decisions, but it is not the ‘silver bullet’ that many may have hoped to protect and support consumers.

Firms need to shift attention from the mechanics of what needs to be done to merely be compliant with the regulation and consider the wider objectives and genuine customer outcome improvements. Investment Pathways is only one element of a suite of activities including updates to the retirement “wake up” packs and ongoing pensions dashboard initiatives. What are the steps that firms should be taking to support their clients to achieve investment growth post retirement and consequentially strengthen their market offering and customer relationships?


Data – the real pathway to good retirement outcomes

It is crucial that firms revisit their data strategy to refine their at-retirement customer journey. Using data effectively can help identify non-advised customers who may require more support or who may be a potential candidate for financial advice. This can then help strengthen the customer journey and initiate a triage process for those with a clear need for more help. Quality data is a tool which can be used to further guide and support customers and increase revenue in the longer term.

Easy navigation down the retirement path leads to better outcomes

Making pensions accessible to customers does not merely mean providing customers with functionality to access their account through a digital channel. It is crucial that Investment Pathways are presented in jargon-free language containing the “right” level of information, demystifying technical phrases and helping to bring to life the impact of retirement decisions. Drawing on examples of customer experience in other sectors through gamification and the use of real-life examples can help bring the retirement journey to life. Offering telephone guidance to navigate online journeys will also be an important tool to humanise the process for the customer and ensure they feel valued, supported and loyal to their provider.

Education, Education, Education

The regulators have sent a clear message that now is the time to consider how the industry educates and informs advised and non-advised customers on their available options. Although education is only one aspect of a firm’s go to market strategy, finding innovative ways to do this can be a powerful way to capture a wider segment of the post retirement market.

Act or be compelled to act – with the firms that grasp the initiative taking not only the higher ground but a genuine step change advantage.

Alpha are experienced in supporting firms develop their end-to-end customer journey and have a market leading Risk and Compliance practice. If you feel this article is relevant to your business and are interested in finding out more, please contact us.


About the Authors

Shona McCluskey
Shona McCluskey

Shona is a Manager at Alpha in the Pensions & Retail Investments practice. Shona has over five years of consultancy experience and has delivered a number of transformation and regulatory implementation projects. She has worked with a range of clients including global wealth and asset management firms, global banks, with a more recent focus on UK pension and retail investment firms.

Alex Shelley

Alex is a Consultant at Alpha with over six years of financial services experience. During his career he has worked on several compliance engagements in the Pensions & Retail Investments industry, including advisory projects with a focus on customer experience. He has a strong knowledge of the COBS requirements relevant to the at-retirement journey and has worked on various projects to help firms meet these rules.