Inflation, higher interest rates, tax changes and Consumer Duty are all prompting advisers to revise their advice for clients in decumulation.
Inflation has eroded retired clients’ spending power. Most advised clients can weather the challenges to their long-term plans, but this year advisers are especially worried about clients who are taking unsustainably high withdrawals from their portfolios.
Higher interest rates have been mostly good for retirees, who can now get much higher returns from cash deposits. Clients have jumped at the opportunity to reduce their equities in favour of deposits and some advisers are increasing their strategic use of cash holdings. But most advisers still haven’t adopted cash management services for clients.
Advisers and their clients are both looking at annuities with less disdain – and advisers are considering them more often now that they produce much better returns, but so far without a huge increase in take-up.
Consumer Duty continues to drive adviser behaviour and business models and firms are already feeling the impact of the impending thematic review of retirement income advice. Tax changes are also affecting retirement planning, thanks to CGT changes and fiscal drag.
The challenge for advice firms is to get the value of their services to exceed their cost. The changes in the economic and financial environment should be helping them to achieve that goal.
We cover all of this and more in our UK Financial Advisers: Advice in Decumulation report, published this week. For more information, please get in touch.