Workers and retirees alike need advice more than ever

As revealed on Wednesday, the latest UK CPI fell to 10.5 per cent in December – modestly lower than the 10.7 per cent we saw in the previous month.

While this is the second consecutive cooling of inflation from the alarming 41-year high of 11.1 per cent experienced in October, make no mistake: the sustained sky-high price jumps are going to remain a pernicious, painful issue for some time to come yet.

It is all too easy to regard inflation as ‘economic data’; meaning sometimes we can wrap it in generic or cold language. 

However, for both workers and pensioners it can have a hugely detrimental impact on their retirement savings and future plans.

Those who are on the cusp of retirement or already retired do not have the benefit of time to plug gaps in savings.

All assets and the values that they have spent a lifetime creating, building and carefully safeguarding can be eroded by inflation. It puts at risk what they have and continue to hold dear as well as their legacies.

As we can all – including financial regulators – agree, when what you have worked hard for for years is suddenly under threat, it creates vulnerability and can cause significant challenges when it comes to decision-making.

Those who are approaching retirement and are still building funds for their futures may find themselves in between a rock and a hard place – 'do I stop saving for the future so I can continue to afford to look after myself and loved ones today?', which boils down to: 'putting off today’s issues to another day'. Or 'do I make compromises now in order to remain on track to meet my retirement planning targets?'

These are tricky and complex decisions and sadly for many, they might find their savings, indeed those things built up over many years, will be impacted.

Those who are on the cusp of retirement or already retired do not have the benefit of time to plug gaps in savings and, together with decreasing values amid bleak market and economic environments, their pension and savings will be hit and, therefore, so will the quality of the rest of their lives.

We should also be prepared for people we are advising to be upset, angry and/or irrational as the reality they face could be extremely daunting.

Again, unfortunately, many will face the real possibility of running out of their savings sooner than they anticipated in retirement.

This is all a major concern and forces many to make purely emotional decisions at a time when they are vulnerable, rather than informed decisions about the future.  

From experience, we know that this vulnerability, for some, will see them become easy targets for scammers or industry ‘bad actors’ guaranteeing higher investment returns, more income and greater access to lump sums.

All of this, especially the increased level of vulnerability, means there is a greater need for financial advice than ever before – and it needs to be properly delivered, tailored, appropriate financial advice, which properly represents client interests. 

How do we do this? By reducing the barriers to talking to us and building trust and empathy, and showing we understand and that we care is a foundation for that trust. Clear communication, authenticity and rapport are also essential in this regard too.

Workers and retirees need help, more than ever before, to make informed decisions.

We should also be prepared for people we are advising to be upset, angry and/or irrational as the reality they face could be extremely daunting and confusing. Arguably, this is perhaps when we are needed most and will take skill, time and discipline on our part.

Once we have established this trust, from there we have to build on life-stage advice strategies to help the client successfully navigate these tricky and consequential decisions.

In this challenging economic and financial environment, workers and retirees need help, more than ever before, to make informed decisions.

When we get it right, our jobs can properly transform whole families’ financial futures for the better.

Simon Chrystal is chief executive of WPS Advisory