The FCA set out detailed information in its final guidance, issued on Friday, on the actions that should be taken to treat fairly those customers who have life and pensions products that are closed to new business, ensuring that they do not receive less attention than customers who have recently taken out a new product.
It said firms are “expected to review their business practices” within three months, from 9 December, and make any necessary changes.
Specific products covered in the guidance are personal pensions, including Sipps and retirement annuity contracts, endowments, investment bonds and whole of life policies.
Megan Butler, executive director for supervision at the FCA’s investment, wholesale and specialists division, said: “Our previous work in this area uncovered poor practices at some firms across the sector. We are not introducing new rules, but this guidance will help firms know what we expect of them to ensure their customers are treated fairly going forwards.”
The guidance included the need for “clear and timely communications about policy features at regular intervals and at key points in the product lifecycle to enable them to make informed decisions”.
It also expected “adequate consideration” of fund performance and policy values to ensure customers are treated “fairly and proportionately” and for them to be able to move from products that are no longer meeting their needs in a “fair and reasonable manner”.
In early reaction, Bryan Low, founder of international distribution company Provisca, said: “In many ways it’s unfortunate that regulators such as the FCA need to be prescriptive and issue guidance to life companies on how to look after their long-standing clients.”
Many life companies and financial advisers are overly focused on writing new business, he said, rather than helping existing clients to achieve their financial objectives as they go through their changing lifestages.
“Thankfully the international adviser market is already moving in the right direction, with adviser firms beginning to ‘farm’ their existing client bases. This benefits clients and helps to consolidate the adviser firm’s ongoing income streams, building value in the firm’s business,” Low added.
Guy Vanner, managing director of life consultancy AKG Financial Analytics, said he welcomed the FCA’s move as a further welcome step in attempts to ensure high quality treatment of policyholders in closed books and highlight standards of good practice.
“Things have in fact improved in recent years, but continued focus such as this is positive. It has to be a case of driving good customer outcomes for all – in open or closed books,” Vanner said.
