The majority of advisers on our platform use a self-invested personal pension as the cornerstone of their clients’ wealth planning, providing the agility required to manage their needs throughout all the lifestyle, personal, employment and financial ups and downs – especially so in the critical period when retirement draws near.
While some may feel anxiety around this next stage of their life, there will be clients that get excited, and quite rightly so, as they start to think about all the money they have worked hard to accumulate throughout their working life. Knee-jerk spending choices could be made, and clients may not have both eyes on their long-term income prize during that first flush. Of course, that is human nature, and it is understandable.
One thing that pretty much always tends to happen is that big decisions get made in the lead-up to retirement.
So advice can make – or break – the subsequent years and decades of a client’s retirement income. So how can advisers help navigate this exciting stage of the retirement journey, and ensure clients can retain a comfortable income into old age, while still enjoying their money?
1. Early conversations, later-life wealth
I appreciate this is taking it back to advice 101, but it is important. The first step is knowing the client and understanding their complete financial situation. Get a clear picture of all of the products and assets they hold, and while you may be speaking to them when they are in the earlier accumulation years, it is still important to ask and get them to think about the lifestyle they want when they come to retire.
Gaining their trust and making them feel secure that you are guiding them effectively is a two-way street, of course. But the clearer the financial picture you have from the start, the better equipped you will be to offer effective advice. And the earlier you know about their income sources and spending plans, the better you can build a retirement strategy that is rewarding for them.
While the conversations should start early, they should also never stop. With time brings change and life changes could mean clients need to adjust their retirement wealth plans accordingly. The past 15 months or so are testimony to this very point, with many people having to consider making changes to their long-term plans.
Research into how the pandemic has affected people’s finances suggests that one in five 60 to 65-year-olds are now considering delaying retirement due to the pandemic.
Hopefully most of us will not have to experience another pandemic in our lives, but there are other life events that can prompt retirement goals to shift radically at short notice, such as health needs or divorces. That is why it is important that advice remains flexible and always takes into account clients’ current needs, even if those needs are now different.
This is where advisers can really show their value, as they are able to manage expectations and can demonstrate to clients what the impact of drawing down on their income, particularly early on in their retirement, will have on their long-term financial welfare.