'When it comes to pension freedoms, the industry has failed to deliver'

The managing director of intermediary at 7IM says it is "critical" the industry understands how it can design the best products for retirement income, especially as regulation is changing.

She says the industry, and platforms in particular, are "brilliant" in helping clients accumulate wealth for their retirement. But when clients tip over into decumulation, "we really need to do better to ensure clients don’t fall into the pitfalls created by pension freedoms". 

In a Q&A with FTAdviser In Focus, she explains what needs to happen in retirement income to help advisers and their clients adapt to a changing economic and regulatory environment. 

As an industry we have failed to innovate and failed to deliver choice.

FTA: What is the provider’s role in the process of creating an advised client’s retirement plan?

VK: As an industry we will only be successful if we work together to deliver the best possible outcomes for clients.

Advisers should be demanding providers deliver innovative and flexible products, services and solutions. We all need to work together to solve the retirement puzzle. 

So as a provider, we will only be able to deliver the most innovative and relevant products by working closely with advisers and capitalising on the opportunities for the entire industry.

FTA: Is the way you are working with advisers changing?

VK: Demanding choice and flexibility is one thing but we know that too much choice can be overwhelming.

It’s key that the industry provides all the pieces of the retirement puzzle to enable financial advisers to do what they do best and put those puzzle pieces together in the most appropriate way for each client in an engaging and efficient way. 

The need for the industry to develop the best possible retirement products has been reinforced by regulatory changes in recent years.

A one-product-fits-all solution does not exist.

It is critical that we understand how retirees’ needs are changing and how we can design the best products so retirees can achieve the goals they set out.

Ultimately, customers are looking for reassurance that they will fulfil all the dreams they desire and have worked so hard for along their journey. The industry needs to get it together to deliver the outcome clients deserve.  

FTA: How might the consumer duty foster closer collaboration?

VK: We welcome the consumer duty because it ultimately helps the client to understand the best products and services, and it holds the industry to account on its actions.

Because of the need for transparency to ultimately deliver fair value for the customer, cross-communication within the industry has never been more relevant and important, so we all need to work together on delivering just that.

FTA: Do you feel providers have done enough when it comes to product innovation since the pension freedoms?

VK: The short answer is a resounding no. I would go so far as to say that as an industry we have failed to innovate and failed to deliver choice, which has meant that advisers do not have the range of robust and flexible retirement plans for clients that they need. 

Our industry, and platforms in particular, remain brilliant in helping to facilitate clients accumulate wealth for retirement.

However, when clients tip over into decumulation, we really need to do better to ensure clients don’t fall into the pitfalls created by pension freedoms. 

FTA: Which areas in particular should providers be more innovative in? What are the main problems that still need solving?

VK: Robust, flexible solutions delivered in an engaging and efficient manner is what we need, but critically we need to ask clients what they want. 

We did some research at the end of 2022 that revealed that nearly one in three (32 per cent) of the retirees surveyed had regrets about their retirement choices:

• 30 per cent would ensure they have greater guarantees on their income;
• 20 per cent would take less from their savings in cash upfront;
• 20 per cent would look for a tax-efficient approach; and
• 19 per cent would opt for greater flexibility.

We need to listen and respond as no one has the luxury of a do-over for their retirement. 

The industry has responded to changes in regulation of recent years, but there is still much work to be done so that it can continue to deliver for its clients in the most relevant way.

FTA: Last year a study showed 53 per cent of advisers had a centralised retirement proposition – do you think advisers are missing a trick?

VK: Many advisers understand that adopting a CRP has significant advantages, but unfortunately many are yet to adopt a CRP that will enable them to have a holistic view of their clients’ retirement.

A one-product-fits-all solution does not exist, and choosing the right tools is essential to delivering the flexibility and convenience that clients need for their retirement plans.

A good CRP should enable advisers to change retirement income strategies for their clients.

It takes time to build a CRP, but once an adviser has been able to incorporate all the relevant tools, they will be able to streamline their workflows as well as be able to demonstrate a consistent approach towards their clients’ retirements.

FTA: What are the main benefits of having a CRP?

VK: Having a CRP should help the adviser find the best possible solutions according to their clients’ individual needs.

A CRP empowers the adviser with a robust, repeatable process that guarantees that the client is leveraging the best services in the market – reducing risks for clients – and that will enable the adviser to grow their business at the same time.

A good CRP should also enable advisers to change retirement income strategies for their clients after an initial strategy has been selected, so clients can have the comfort of knowing their retirement plans can adapt quickly to new circumstances.

FTA: What do you think the chancellor’s pension tax changes might mean for the use of pensions in retirement planning, as opposed to other tax-efficient investments?

VK: The chancellor’s recently announced pension changes have increased the need for flexible and highly tailored advice to customers.

The industry has been challenged with the urgency of coming up with the tools and solutions to be able to adapt to clients’ needs, and this is where the industry needs to get it together and innovate for clients to prove its value.

carmen.reichman@ft.com