Stockmarket collapse poses 'biggest threat' to drawdown

Stockmarket collapse poses 'biggest threat' to drawdown
Justin Taurog, MD of VitalityLife and VitalityInvest

A stock market collapse would be the biggest threat to their clients' pension drawdown plans, according to nearly a quarter of advisers.

According to research by Vitality last month, this figure has doubled over the past year, having previously been just one in 10 (11 per cent) in 2021. It is now at 23 per cent.

The survey from the compay, which canvassed the opinion of 204 financial advisers, also revealed that 15 per cent believe regulation is the biggest threat to drawdown, closely followed by sequencing risk (14 per cent) and under-estimating one’s own life expectancy (14 per cent).

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Justin Taurog, managing director of VitalityInvest, said: “Given that this research was conducted before markets reacted to the Ukraine invasion, such fears are likely to have been heightened, particularly in light of inflation and the wider economic outlook.  

“This is problematic, as sharp market falls have the potential to exacerbate sequencing risk for clients in drawdown.”

Taurog explained that although markets have started to recover from losses in early March, the situation remains “extremely unpredictable” and therefore advisers need resilient, well diversified portfolios to protect clients against future market conditions.

Last year in an interview with FTAdviser, Taurog said insurers need to act more like technology companies or risk the hard reality of losing both the trust of - and business from - advisers.

He said if insurers aren’t acting as digital technology companies, then the level of trust instilled in them by their intermediaries will stagnate.

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