New advice model needed for at-retirement market
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Speaking at the Institute of Financial Planning annual conference in South Wales, head of retail advisory for Barrie & Hibbert said the statutory three-year review process used by the majority of the advisory community did not do enough to mitigate the risks involved in achieving a sustainable retirement income.
He told delegates: “The UK retail investment industry has failed to understand the long-term retirement planning market.
“It’s a risk management problem. Currently, too many advisers look at retirement needs in erms of assets, and not client outcomes.”
He said issues such as longevity risk, the sequence of returns that comes from equity risk, in addition to liquidity, inflation, interest rates and mortality risk can have a big effect on retirement income. Advice on drawdown never focuses on these risks.
Mr Mowbray suggested the advisory community needed to concentrate on income sustainability. He said: “They need to be booking regular, quarterly reviews, this is crucial. They should be looking at whether the client can sustain that level of income for life, what their income comfort zones are, and their expected bequest values should be when they die.
“This regular approach to reviewing income will make it much less painful for the clients and should reduce the falls in income that could come with the traditional drawdown approach.”
He added: “We need a market with risk-graded investment options and managed packaged products that target a desired retirement income, and flexible solutions. Until we get the industry to understand this, the incentive for providers will not be there.
“Elsewhere the financial planning community must demonstrate the value of a regular review process with the client. At-retirement is the place where these comprehensive reviews have the most value.”