It’s time for the industry to stop digging on Investment Pathways

If the pathways get more people engaged with their pension that must be hugely welcome, says Moira O’Neill, in the latest interactive investor blog.

Two years since the Financial Conduct Authority (FCA) published its proposed rules on investment pathways, 1 February sees the big reveal as pathways ‘go live’. We are as curious as anyone to see how the wider industry has approached the challenge of building four ‘buy and forget’ solutions for less engaged investors.

It is a big responsibility – and has been a demanding two-year construction project. Although with a typical new motorway taking 2.5 years to build (according to the Institution of Civil Engineers), we shouldn’t be too dramatic about our own, more virtual, pathways.

Critics of pathways had argued that they would encourage providers to talk their own book and promote their own ranges (an easy road for ii to avoid, given that we are not a product provider). So, it is interesting to see the different ways the wider investment platform industry and other pension providers have responded to the task – through whole of market, in-house ranges, and varying charging structures.

Others said pathways were no substitute for financial advice, missing the point that the FCA’s big concern was making cash an active choice, rather than a default option, given that its analysis found 18% of non-advised SIPPs in drawdown are 80% or more invested in cash. In this context, pension pathways look inspired.

Our objective was always to choose appropriate funds and risk levels for each pathway, looking across the whole market for the best performance combined with excellent value for money. We wanted to make sure our choices are clear, fair and not misleading for customers, so the rationales will be jargon-free and explain clearly why we have chosen them and their suitability and risks.

Will they be a big money spinner for investment platforms? There’s absolutely no reason why they should be.

But, while we don’t expect to see huge uptake from our customers, who are engaged investors who like choice, for new pension investors coming to the platform, Investment Pathways could act as a valuable bridge.

Negativity on the concept of investment pathways does consumers no favours – they deserve to have faith that these selections have been made with care and conviction. If pathways get more people engaged with their pension, whatever the take up on individual platforms, they have been a success.

In the past year, we have seen more people investing for the first time, so anything that encourages a long-term, balanced approach must be hugely welcome.

After a week that saw speculative investors following the lead of ‘keyboard warriors’ in betting on high-risk stocks such as GameStop, the industry needs to do far more to get investors on a responsible path. This is a start.

ii’s fund choices for the pathways, available on the platform from February 1 (for more information, see here).

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