The last 12 months have seen some significant shifts in retirement advice. However, adaptation to pension freedoms remains very much a work in progress for both advisers and providers.
As well as shifts in retirement planning over the past year, we have also seen a plethora of new investment ‘solutions’ brought to market. As we anticipated in our retirement research last year, many of these are based on bucketing and structured as platform model portfolio services (MPS), following the broader MPS growth trend. However, we still find that there’s a gap between product and planning.
Advisers’ processes typically revolve around risk profiling that leads (directly or indirectly) to an asset allocation model. While cash flow planning is increasingly used, this is usually to stimulate conversation in annual reviews rather than as an input when choosing investments. Finding an objective measure of capacity for loss remains the biggest difficulty, with little consensus on how (or if) such a thing could be determined.
Advisers are often using the same investment propositions pre- and post-retirement, despite very different planning processes and potential hazards from pound cost ravaging and sequencing risk. Asset managers, DFMs, model portfolios, platforms, ratings firms and advisers have largely designed their propositions around capital preservation and growth. How this capital is efficiently (read: compliantly) converted to income remains very much an open question.
Our upcoming report: UK Financial Advisers: Retirement Propositions, looks at retirement advice, including financial planning processes and the investment solutions that are being used. Get in touch for more information.