Pensions consultancy firm Hymans Robertson is considering opening its own drawdown advice business, after identifying a gap for this service in the UK market.
Stephen Birch, strategy director at the firm, told FTAdviser the advice market was "pretty much set up for accumulation" which meant people with defined contribution (DC) pension pots worth between £150,000 and £200,000 were struggling to find financial advice.
He said: "The advice community is doing a very good job, but they are maxed out on serving wealthier individuals."
Mr Birch identified three problem areas in drawdown advice: using appropriate longevity assumptions, the withdrawal rate applied, and matching investments with the individual’s goals.
Hymans Robertson developed a tool for drawdown modelling which is going to be offered to Parmenion's clients free of charge.
The software allows advisers to test their plan against a set of detailed metrics, taking into consideration the client's life expectancy, the likely behaviour of their portfolio and their risk profile.
At the time of its launch in February, the tool was tested by consultancy firm the Lang Cat, which consulted a pool of 36 advisers and concluded it was a positive addition to the market.
Some 72 per cent of the advisers said they felt not sufficiently well served by the tools currently available, while 70 per cent found the concept of using individual client demographics appealing, albeit some had reservations about what they said was a 'postcode lottery'.
Hymans Robertson is currently testing its tool, and will decide by the end of the year if it will launch an advice service, which could be offered directly to consumers or through an adviser network, Mr Birch said.
A guidance service is being considered as well, he added, saying "there is a lot of room for personalised and targeted guidance in the market."
Hymans Robertson is expecting to make a decision on what route to take by the end of the year.
Charles Chami, director at Glamis IFA, argued that "anyone able to offer a new service that could potentially benefit clients is good news".
He said: "I'm not sure that I agree that the £150,000-£200,000 clients are being underserved, but I think there is definitely an issue in the sub £100,000 category.
"If the tool is automated then there will still need to be some consideration for clients personal circumstances that are harder to model, such as issues around inheritance tax or significant life events. That said I welcome innovation in the sector and wish them luck with their new tool."
According to recent data from the Financial Conduct Authority (FCA), just less than a third of drawdown sales are non-advised.
What's more, according to the regulator’s Retirement Outcome Review final report, published in June, about 33 per cent of non-advised consumers were wholly holding cash, with more than half at risk of losing out on returns as a result.
The regulator is planning to force providers to offer their customers easy to access ready-made drawdown investment products, in a bid to prevent them from sticking their money into cash.
maria.espadinha@ft.com
