Clients typically have the highest amount of assets and the greatest complexity in managing them at retirement. This presents opportunities for advisers.
Furthermore, most advised clients are over 55, and a third are already in decumulation.
Decumulation is a completely different kettle of fish to accumulation, but fewer than half of adviser firms tell us that they run a dedicated centralised retirement proposition (CRP) – far lower than the proportion running a more general ‘investment proposition’.
In recent conversations we’ve had with advisers, those running CRPs have highlighted the increased reliance on ongoing service when it comes to decumulation advice. They are focusing more heavily on cash flow modelling and regularly revisiting plans to ensure clients stay on track. There are far more variables to consider when managing income as well as capital.
A few advisers told us they effectively have to police clients’ expenditure to ensure they don’t run out of money – even terminating relationships with obstinate clients who refuse to stay within budget.
The cost of getting it wrong is high, both for the client and potentially the advice firm. There is significant ‘hindsight risk’ with retirement planning – what looks like a sensible approach today might look cavalier to an ombudsman in 20 years’ time when confronted with a penniless client. As well as ensuring ongoing suitability, advisers need to implement processes to ensure that any plans that go awry are spotted and corrected before it’s too late.
Platforum has just published UK Adviser Market: Retirement Propositions. For more information please contact Jean-Luc de Jonge jeanluc.dejonge@platforum.co.uk.