Fact-finding in the new retirement advice world
You don’t have to go back many years to remember the days when pensions and retirement were all about rules. Percentages of earnings based on your age, carry forward and carry back, retirement dates, benefit formulae.
When you advised clients the process was less about what they wanted, and more about what they were allowed to have. All pension, or cash with pension, guaranteed rates, but only if you didn’t mind level or single life income.
Of course, I would be a fool or a hermit who isn’t aware that the world of pensions is still heavily surrounded with rules and regulations about contributions and benefits, and the interaction between various product types and regulatory regimes only ever seems to complicate retirement decision making.
The new regime of freedom and choice does mean that the advice process is now less about what clients are permitted to do by product providers and more about product providers delivering the outcomes that clients set.
This in turn leads to the potential for a very different interaction with clients. Historically, advice was about data gathering and presenting a table of choices: this or that, now or later. Level or inflation-proofed, retiring today or deferring.
Let’s also not forget that the choice of how to take retirement benefits was for most investors one that would probably only be made on one occasion and have to last for the remainder of their lives.
Now, instead of retirement advice being a fact-based exploration of a menu of permitted options, it is a conversation and, most importantly, one which is led by the client. But are clients ready for this new sort of conversation?
Fact finding
Most members of the public will recognise the requirement to go through some form of fact-finding process, but if this discovery meeting is not well-positioned by the adviser it can be seen as a dose of cod-liver oil - something awkward and unpleasant, but ultimately beneficial.
Advisers must collect enough information to be able to give suitable advice. However, we should aspire to more than the minimum: effective fact-finding means knowing enough about a person and their finances to work out if they have enough money to live the life they want to lead (and what to do if they haven’t).
Clients can sometimes try to get around the process, occasionally with adviser encouragement, by choosing not to fully disclose all their information and only divulge data relevant to the subject under discussion.
Is it possible to argue that there is any part of a person’s financial circumstances which is not relevant to the retirement discussion?