There may be some clients who have access to other sources of income and are able to turn off their drawdown income.
Review the investment holdings from time to time with clients.
Regardless of whether the markets are rising or falling, advisers should regularly review their clients' investment holdings, asset allocation and income.
Circumstances also change as much for the client as they will for investment returns during retirement. Just because a client can take the agreed level of income, it doesn’t mean they should if they aren’t spending it.
Adjusting income to match a client’s needs will help to improve its future sustainability.
Set a level of stockmarket fall
Advisers may want to discuss setting a level of market fall that triggers a conversation earlier than the one planned in the diary. This can give added reassurance to clients.
This approach is likely to be most suitable for ‘lighter touch’ clients, where advisers may be using multi-asset funds to provide a diversified portfolio and therefore rebalancing, or reappraising, market sectors is not a priority.
This is one to split the audience – rebalancing portfolios.
Rebalancing can help maintain the overall risk of a portfolio in line with a client’s needs.
Rebalancing won’t necessarily provide a greater investment return, but it is, instead, a protection mechanism against creating undue or unanticipated risk.
Advisers may wish to assess this with their clients at review time, while others may choose to automate the process.
Be wary of sequencing risk. While it’s important to understand the range of outcomes of any investment, it’s also really helpful to understand the range of likely risks along the way.
If your client suffers losses in the early years, particularly when their fund value is high, it can be much harder for their portfolio to recover.
When either encashing units or taking capital to provide the necessary ‘income’, early falls can have a catastrophic impact on a portfolio’s ability to provide the future necessary income.
If encashing capital outside of a pension it is important to use a client’s Capital Gains Tax allowance to help control or reduce the impact of taxation.
They may be out of fashion
Don’t ignore annuities as they could prove valuable for some clients.
Short-term annuities could provide the added comfort clients are looking for if stockmarkets are volatile at the start of their retirement journey, while others could benefit from enhanced annuities if their health deteriorates later on.
It has to be online for clients. With the growing role drawdown is playing in delivering retirement income, it is understandable that many people want to know their money is there and that it’s working for them.
