Centralised retirement propositions are on the rise as advisers increasingly have to think about clients’ decumulation journeys, Henry Cobbe, chief investment officer at Copia Capital Management, has said.
Mr Cobbe said before pension freedoms, advisers didn’t have to worry about decumulation, as it was passed off to insurers via annuities or left with scheme trustees in DB schemes.
But with pension freedoms they have to think about decumulation journeys, he said.
"That’s a big responsibility, but it’s also a great opportunity as well."
Mr Cobbe said: "So we see a best practice centralised retirement proposition as following the guidance the regulator gave on CIPs [centralised investment propositions], but also being compliant with Mifid and also being compliant with the direction of travel and being cognisant of the Retirement Outcomes Review."
He explained for advisers that meant thinking about the needs and characteristics of the client group, about how to align investment objectives to the objectives and outcomes of that client group, and having "open architecture in terms of products and strategies for those different objectives".
Asked what the main risks were to a client portfolio in decumulation, he suggested it was not just an investment risk, but an economic risk as well.
"For example, not having enough money to fund the retirement you expect, or worst of all, running out of money entirely.
"So the way you look at investment risk is think about volatility. The way you look at economic risk is, how do I make sure I have enough in my pot to last the course," he said.
Mr Cobbe added: "The key determinants of that are, what is your pot size? What is your withdrawal rate? And what is your time horizon?
"So, crudely speaking, what have you got? What do you need? And how long have you got?"
Read the latest CPD article by Mr Cobbe for FTAdviser here on getting the withdrawal profile right for clients in decumulation.
Watch the full video interview at the top of the page.
eleanor.duncan@ft.com
