How with-profits funds can provide a smoother journey for clients

It is easy to understand why anyone looking at recent market performance could be tempted to think again about where to keep their cash, especially if they are close to retirement.

The FTSE 100 generated returns of 5 per cent during 2022, for example, a time when inflation was running at 9.2 per cent. And during that time, it saw a number of sharp peaks and troughs in performance.

Against this backdrop, anyone approaching the end of their working life will have legitimate concerns about how best to preserve their pension pot. 

As a client gets closer to that inflection point when they retire and accumulation switches to decumulation, market volatility can be a source of great stress.

So, how can advisers help moderate this risk and ease their client’s anxiety? 

Accumulation proposition

Most UK advisers operate using a centralised investment proposition during their clients’ accumulation phase, which brings many advantages.

It means that companies apply a standardised method of selecting approved investment portfolios for all their clients, based on things like their appetite for risk, time horizons and preferences, such as sustainable investing.

Each portfolio will feature a mix of assets in varying weightings, which will be constantly monitored and regularly reviewed.

It is a top-down approach that provides a common set of guidelines around how advisers invest for their clients, which is what makes it so popular with companies and advisers too.

As a client gets closer to that inflection point when they retire and accumulation switches to decumulation, market volatility can be a source of great stress

A standardised approach ensures consistency of advice across the company, helping ensure strong governance and compliance in a highly regulated market.

Having a range of packages that suit different classes of clients also brings efficiency benefits, as advisers do not have to start from scratch and create a bespoke package for every client, freeing up time to engage with clients face-to-face and build better relationships.

It also enables economies of scale that mean companies can charge lower fees, reducing the overall costs to clients, and making their offer to the market more attractive.

Tipping point

Quite simply, the aim of a CIP is to help clients accumulate the largest retirement pot possible.

Commonly, a portfolio would evolve over time, with an early focus on riskier equities, stocks and shares shifting to a more cautious portfolio featuring a higher proportion of fixed interest bond holdings as retirement approaches.