In the FCA’s retirement income advice thematic review (TR24/1) published last week, we and others had expected more criticism of advisers’ less robust planning processes and the excessive use of drawdown instead of guaranteed products. Instead, the regulator highlighted good and bad practices and offered gentle encouragement to advice firms about improvements.
That being said, our own research finds that advisers’ decumulation planning processes and product recommendations had already started to evolve, reacting to the macro picture before the intervention of the regulator. Higher inflation had spooked advisers, who could see that more of the retirees on their books were now at risk of running out of money. And higher interest rates are now making annuities a more viable option.
Our research’s overarching conclusions haven’t changed: advisers need to undertake deeper analysis of capacity for loss through cash flow modelling – which they need to use more and better. They also need to manage decumulation risks more effectively with appropriate products, rather than relying solely on ongoing planning to spot upcoming problems and adjust clients’ portfolios. Subscribers will be able to access an updated version over the next few days with some additional thoughts on the implication of the FCA review.
Get in touch for more information about our new report: UK Financial Advisers: Advice in Decumulation.