'Providers are not innovating enough'

But when it comes to innovating to help advisers streamline their retirement planning, providers are not doing enough, says Tim Morris, an independent financial adviser at Russell & Co Financial Advisers.

He says most platforms are too slow when it comes to adopting technology and ensuring functionality, which in turn hampers advisers' productivity.

In a Q&A with FTAdviser In Focus, Morris explains how he goes about retirement planning, why providers need to do more, and what the chancellor's pension tax measures will mean for pensions and other tax-efficient investments.

Most providers are much too slow when it comes to adopting new technology.

FTA: What are the main elements of your retirement income advice strategy?

TM: My at-retirement clients have higher portfolio values and I therefore run a more bespoke offering. This allows for drawing profits from funds that have performed better, or the least bad as the case has been recently. 

Those with lower portfolio values are often invested in low volatility multi-asset funds. This tends to smooth out some of the market troughs. 

FTA: Which products do you typically consider?

TM: I will consider any, yet have not used income-producing funds so much in recent years. This includes equity income and high-yield bonds. I tend to prefer strategic bond funds for fixed income exposure.

Fortunately, I had very little client exposure to government bonds, which capitulated due to the "mini-Budget" fiasco last September.

FTA: Do you have a centralised retirement proposition?

TM: We don’t, mainly because we are a relatively small firm and they take a lot of time and resource to run well.

You can easily use multi-asset funds or MPSs these days for a CIP and have plenty of choice. That’s not to say this won’t change.

The increase in the AA is good news for all, especially those close to retirement who want to make up for lost time.

At present our proposition serves retired clients well. The fund provider will vary depending on the clients’ particular needs and objectives. As well as their risk profile and capacity for loss.

FTA: How do you think retirement income advice might change after the FCA’s review and/or the consumer duty?

TM: There will very likely be further need to tailor and evidence the suitability of the investment approach.

I don’t see the need for major change, so let’s hope they don’t throw the baby out with the bath water – unless you count workplace pension default funds.

That is where I’ve had some potential clients approach me after losing more than a third of the value of their supposedly low risk portfolio, which was heavily invested in gilts.

FTA: Are providers doing enough when it comes to product innovation, especially since the pension freedoms?

TM: Most aren’t. This is where the consumer duty should shake things up. If not, that will be a major missed opportunity.

For example, most are much too slow when it comes to adopting new technology. This in turn holds back productivity.

This can be as basic as platforms functioning well. And the fact it took a global pandemic to move away from paper forms to electronic signatures – only the best part of a decade late.

FTA: What’s the role of the provider in your retirement income advice process? 

TM: To provide timely and insightful information and a clear description of the type of client profile they deem their funds suitable for. This can be in the form of case studies, which some providers already do well.

FTA: The chancellor in his latest Budget abolished the LTA and raised the AA, how will this affect your retirement and IHT planning?

TM: On the whole, this is very positive.

There are some exceptions where it will impact existing clients' planning. For example, those who have already taken action to mitigate any potential tax charge from exceeding their LTA.

The increase in the AA is good news for all, especially those close to retirement who want to make up for lost time.

FTA: What might the chancellor’s changes mean for the role of pensions as a product as opposed to other tax mitigating investments such as VCTs? 

TM: I see less need for VCTs as they often form part of the advice for a client who’s reached their pension LTA. And those who were impacted by the tapered AA. And even for those who could afford to invest more than £40,000 a year into their pension.

And with the new £60,000 pension AA, plus £20,000 Isa, I don’t have many clients who will be investing that much or more on an annual basis.

carmen.reichman@ft.com