IFAs say third way products ‘too complex’
Cost and complexity are to blame for poor take up of third way retirement products, a survey has revealed.
Around 53 per cent of IFAs believe the introduction of third way retirement products has made no impact on the advice they give, data from specialist research firm Splice Consulting has revealed.
Some 40 per cent of the 1,000 IFAs who responded to the survey stated that third way retirement products do not provide an effective alternative to the current market offering. In addition, 13 per cent of IFAs are unaware or have minimal awareness of third way retirement products.
Key reasons given for the poor take up of third way retirement products are that they are too expensive and too complex. Advisers believe the cost of the guarantee is too high while the rate of return is too low and there are too many hidden costs associated with the product, the survey found.
Regarding the complexity of third way retirement products, advisers commented that the proposition was over-complicated with too many variations.
Julian Green, director at Splice Consulting, said: “Providers need to simplify the product proposition, produce client-friendly marketing material, be transparent on costs and offer a better value product. You can’t offer the guarantee of annuities and the investment upside of income drawdown without paying a price. But at the moment, the balance between risk, reward and price seems out of kilter.”
The research also examined IFAs’ attitudes towards income drawdown and annuities products and found 60 per cent of IFAs recommended income drawdown products to their clients.
The IFAs said the main features they look for in a good income drawdown product are the range of funds, low prices/charges and efficient back office administration and service.
The top five preferred income drawdown providers are Standard Life, Scottish Life, Scottish Widows, Aegon and Axa Wealth.
In addition, 68 per cent of IFAs interviewed recommend annuities to their clients. The overwhelming majority of IFAs stated the main feature they look for is a high annuity rate. Additional features in the selection process are level of possible enhancements and availability of a guarantee period .
The top five preferred annuity providers are Aviva, Just Retirement, Partnership, Legal & General and Prudential.