After chasing the sun in Morocco for a week, I flew back to England and hopped on a train straight to London where I spent my time chatting, amongst other things, on a panel for the launch of BNY’s Life Beyond Work paper (a snazzy new phrase to replace “retirement” and all the negative connotations that go with that).
The event was centred around how BNY Mellon Investment Management’s paper looks at life beyond work from a range of angles and of course covers the impacts of inflation on consumers and of regulation on advisers. I was asked to share what we, at Verve, see as being a pressure on advisers who are providing retirement planning, and my answer was that the main issue isn’t a single pressure, but the endless interaction between numerous pressures and the challenge that causes firms to attempt to pick through things. For example, we have:
- The impact of inflation and interest rates makes annuities far more mathematically attractive (if not emotionally), but this is immediately being impacted by the service challenges as annuity providers were caught on the hop.
- The client’s retirement plans have been impacted by Covid. Many people “retired early” as the world was upside down but have now chosen to go back. Some because of cost-of-living pressures. Some because of boredom. But all reversing, to an extent, the plan their adviser put in place.
- The impact of the employment market bouncing from one extreme to the other, and back again.
- The change inregulation, from Consumer Duty through to the retirement income review, means business plans and processes need constant reviewing.
- Even outside of all of these immediate factors, is the broader sociological piece. We are now getting to the end of the ‘Boomers’ retiring and moving into the ‘Gen X’ generation retiring and their retirement plans and expectations are very different; meaning the approach to retirement advice for the last 10 -15 years needs an overhaul anyway to reflect the generational shift.
Each of these is a challenge to be grappled with in the context of providing robust, future-proofed (if possible), compliant advice; when you have them all playing out at once, it can feel impossible to be able to pin something down, with each almost-solution just wriggling and slipping out of your grasp.
We also discussed the change in philosophy to retirement planning more broadly. Back in ‘ye olden days’ when I started in finance, we would sometimes use the free Trustnet site to randomly choose funds and sometimes the adviser looked on the back pages of the FT at fund performance, went down the list and chose one he liked the look of (compliance people reading this, I’m sorry if I just ruined your whole week!). Things, of course, moved on and firms started creating actual portfolios, rebalancing etc (CIPs). The next stage was for Centralised Retirement Propositions which, initially, were just a decumulation version of an accumulation CIP.
However, we have been talking to our firms more recently about their CRP being a Centralised Retirement Philosophy and it had nothing whatsoever to do with fund selection and everything about recognising the extensive variety of approaches to retirement for clients, the myriad of potential solutions, which you are able to advise on and a centralised approach to it based on their circumstances. For example, your CRP could include your approach to:
- Pension plans (and your structure around drawdown vs annuity vs hybrid).
- Investment income (and priorities of how and when).
- Property portfolio incomes.
- Continuing to work part-time (the hard stop of retirement appeals less and less to many people).
- Equity release at an earlier stage, not just for long-term care.
While there are clearly a lot of challenges here, the unanimous verdict of the panel is that it does indeed provide a huge opportunity for everyone in the advice sector. The more complicated it becomes to deliver sound financial advice, the more important it is for individuals to seek professional support for their retirement planning.
Overall, the session was full of industry insight into how, as an industry, we can do better. Which, if you know me, know I’m all for! If you want to discuss more on this topic, feel free to drop me a line and we can chat further.
Cathi Harrison, CEO and Founder