Why don’t you recommend natural income strategies to more clients?
Clients who are retiring have different needs
Part of the problem is that some advisers are not making enough of a distinction between accumulation and the decumulation stages as clients head into retirement: 75 per cent of the advisers in the BNY Mellon IM research say they do not need to alter their investment strategies between the two stages because long-term investment principles apply universally.
But this could be challenged under the Financial Conduct Authority’s Consumer Duty rules. In its recent review of retirement income advice, the FCA said that advisers need to distinguish how they think about risk for retirement income clients from their approach for clients who are still accumulating wealth.
“Clients that are in decumulation have very different characteristics, attitudes, circumstances and capacity for risk,” says Richard Parkin, head of retirement at BNY Mellon IM. “This will require advisors to think about doing something different for retired clients — not just from an investment point of view, but perhaps also in terms of platforms and advice propositions.”
But this also poses a potential dilemma for financial advisers. “To make the money last, I need to increase their risk profile to get them the money they need to go through a cost of living crisis. It’s trying to resolve those kind of conflicts that is challenging,” says Michelle Lambell, chartered financial planner at The Minster Partnership.
It is an issue that will become more pressing as a new generation of clients approaches retirement with more complex needs, and often with smaller pension pots than the previous generation.
A combination of consistency, optimal use of the right tools, platforms and technologies will help advisers meet the needs of retirement clients in a tailored and cost-effective way.
For more information about investing for retirement click here
