Pensions  

Have you got your centralised retirement proposition?

  • Identify the differences between Centralised Retirement Proposition and Centralised Investment Proposition
  • Describe what ability to bear loss means
  • Describe some of the risks you have to take account of with centralised retirement propositions
CPD
Approx.30min

Do they understand the investment risk that comes with this? If they suffered a fall in the market just before drawing an income or once they start, do they understand the impact this would have?

Is this sustainable? Attitude to risk is still part of the consideration, but capacity for loss becomes the real driver.

And this leads me to the second strand of a Centralised Retirement Proposition – your process. 

Can you demonstrate that you have built a robust and evidence-based income strategy? Can you demonstrate the client understands this?

Can you evidence the investment assumptions you have used, where these have come from and that they link in to the clients risk profile? Have you stress tested this solution?

I am not talking about the individual advice process here – this absolutely should be specific to each and every client and the solutions you advise should tie in with their specific aims and objectives. 

But if we consider the fact that we now have £9.48bn (ABI Q4 2018 stats) entering the advised drawdown market, up from £2.96bn in 2014, how has this affected your business?

Would you agree you have more clients than ever going into drawdown?

Directly as a result of this, have you seen an increase in the number of client reviews you are undertaking?

Five years ago most drawdown clients went into capped drawdown – someone else calculated the maximum income they could take. 

Someone else worked out if that income was sustainable. Now that sits with you.

Client reviews

So, you have more clients going into drawdown resulting in more reviews. The review process has changed significantly and the actual work involved has increased too.

It is therefore likely that you have already seen an increased time spent on reviews and as more clients go into drawdown, this will only become greater. 

If you consider two clients per month going into drawdown spending four hours on each review, you can see from the table below that five years from now you will be spending a lot more time on client reviews.

 

If you are in a position to take on more staff to deal with this – great. If not, what options do you have?

Well one option is to streamline your processes and ensure you have the most efficient proposition possible. 

A centralised retirement proposition is one way to do this – as a firm, you have a documented process that demonstrates regardless of who the client sees within the firm, they will receive the same service and you have a range of investment options within this to reflect the specific needs of clients drawing an income. 

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. A centralised retirement proposition is based as much on clients' attitude to risk as is a centralised investment Proposition. True or false?

  2. What does ability to bear loss mean in a centralised retirement proposition?

  3. Which of the following is not part of the process in centralised retirement proposition:

  4. What is one of the consequences of more clients going into drawdown?

  5. Which of the following is not a way to segment clients:

  6. Which of the following is not an area to stress-test:

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Identify the differences between Centralised Retirement Proposition and Centralised Investment Proposition
  • Describe what ability to bear loss means
  • Describe some of the risks you have to take account of with centralised retirement propositions

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