Since the retirement freedoms were first mooted way back in spring 2014, people in this industry have spoken about little else, give or take the odd detour into the FAMR, robo-advice or Strictly Come Dancing.
But compared with the volume of chatter around the subject, there has so far been relatively little action from the provider side.
We are collectively no nearer any real or accurate understanding of what the new landscape will look like.
And beyond a handful of rebadged multi-asset income funds and one or two blended solutions starting to emerge now, the tools available to advisers to plan clients’ retirement are largely indistinguishable from those that stood before.
In short, the exciting new pensions landscape does not yet have an exciting new range of products to match.
This inertia on the part of product providers is understandable and excusable; I have written before of the peculiar challenge the industry was presented with, when the greatest upheaval in living memory was thrust upon it with barely 12 months’ notice.
At the best of times our industry moves at the speed of tectonic plates.
Everyone is entitled to an opinion, but with his position comes responsibility.Whether a result of lethargy, onerous compliance requirements or just sheer fear of the new, the Pangaea of the pre-freedoms retirement world still dominates.
There has been a shift in power from annuities to drawdown, but they remain the two dominant products.
Or at least, they are most popular with just about everybody, and will be until you get a better sense of what you can do.
Paul Lewis, however, has a better idea, announcing recently that the trend for drawdown was misguided and that retirees should invest their entire pot in cash.
You probably know Paul Lewis. In case you don’t, he is best known as the presenter of Radio 4’s consumer finance show, Money Box.
Among IFAs, however, he might be better known for the needling of advisers to which he is occasionally prone on Twitter. To be fair to him, Mr Lewis is adamant that he will always support ‘good’ financial advice.
Whatever you think of him, Paul Lewis probably has the best platform in the country to address and enhance the financial wellbeing of the masses.
Radio 4 has over 10m listeners and downloads of the weekly podcast of his show are measured in the hundreds of thousands.
Very few national newspapers have a larger readership and even for those that do, only a portion of readers will actively read the personal finance pages.
What is more, people trust Radio 4. The masses (who largely don’t receive professional advice) know the station as the home of reassuringly authoritative broadcasts such as the Today programme, Test Match Special and the Shipping Forecast.
Even The Archers was originally launched to guide farmers in helping to drag Britain out of rationing, with tips and hints worked into the early plots.
Such is the level of reliance listeners place on what they hear from the station, the post-war government deemed Radio 4 the most effective way to convey a message that mattered.
At a time when the Citizens Advice Bureau has identified an advice gap that dwarfs any previous estimate, when the head of one of our industry’s biggest trade bodies has been forced out reportedly for being ‘too consumer-focused’, and when one of the most important, fastest growing sections of the industry is pinning its hopes on an oversized, technicolor imaginary being called ‘Workie’, consumers as a whole need rational and valuable help more than ever.
Paul Lewis is perfectly positioned to provide that help, but instead he is suggesting that all retirees should exploit the freedoms by sticking their entire pension pot in cash.
Even passive funds were considered too racy, as Mr Lewis supported his suggestion with the claim that, over half of five-year time periods, cash had outperformed the FTSE. Notably, he did not provide the margin by which the FTSE had outperformed cash in the other half.
There is a place for cash, but at a time when rates are at an all-time low and show no signs of significant increases, perhaps for decades, Mr Lewis’s suggestion shows a basic lack of understanding of – or refusal to consider – the impact of inflation.
Beyond the content of the message, the phrasing left a lot to be desired. Suggesting that advising anything other than investing in cash represents a potential “misbuying” scandal is unnecessarily emotive and irresponsible.
As I have acknowledged, nobody seems sure of how best to exploit the new landscape, but I think there should be near unanimity that solely using cash is not the best thing to do.
Everyone is entitled to an opinion, but with his position comes responsibility and anyone following Mr Lewis’s advice will almost certainly lose out in real terms as they eschew the chance of growth in favour of investments that will always be outpaced by inflation.
Seeing as Mr Lewis is so insistent that he supports good advice; maybe he should worry more about offering it.
