Pension providers urged to ‘seize the moment to rebuild consumer trust in pensions’ ahead of FCA’s new investment pathways

• Digital retirement solutions firm ABAKA believes that the FCA’s new mandatory investment pathways present a real opportunity for providers to embrace digital solutions and ‘win back’ customer trust 
• Artificial intelligence (AI), such as chatbots based on natural language could be key to engaging customers who are planning their retirement  
• A reliance on legacy tech by some providers could be expensive, inefficient and hard to scale  
• FCA’s new mandatory investment pathways come into force in August 2020.  Pension providers will have to find new ways to engage with customers and explain the complex options available in accessing retirement pots.  

Pension providers can ‘seize the moment to rebuild consumer trust in pensions’ before the Financial Conduct Authority’s (FCA) new investment pathways come into force next year by embracing technology and digital solutions, a London-based fintech company has said.  

ABAKA, a digital retirement solutions firm, believes that AI-powered tools such as chatbots and intelligent personalised nudges could dramatically improve customer engagement in retirement planning, while a reliance on legacy systems could be costly, hard to scale and inefficient under the new regulations.  

Fahd Rachidy, CEO at digital retirement solutions firm ABAKA said:  

 “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. AI-powered chatbots, built on natural language understanding, are one example. Personalised and intelligent nudges are another one. Rather than customers having to use clunky web-based forms and not understanding what they are doing, providers could engage with them through human-like conversational AI and frictionless digital experiences.” 

In July, the FCA published its final rules, guidance and feedback on the Retirement Outcomes Review consultation CP19/5, which requires drawdown providers to offer non-advised customers investment pathways – four main options for how they want to use their drawdown pot.  

The new investment pathways follow concerns from the regulator about the number of consumers entering drawdown without seeking advice – around 30 per cent – and the potential of losing out on better retirement options.  

But ABAKA, which works with providers to implement cloud-based digital solutions for customer engagement, says 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.  

Fahd Rachidy added:  

“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. 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.” 

To learn more about ABAKA visit: abaka.me