Clients' main aim is to keep pre-retirement living standards, say advisers

The research, conducted in December 2021 with Next Wealth, asked 212 financial advisers about the hopes and fears of retirement clients.

Advisers noted that delivering on client income aspirations has been challenging in recent years following the onset of the coronavirus pandemic. 

A quarter (25 per cent) of advisers listed concerns relating to the financial markets as their top challenge for 2022, with some expressing specific concerns about meeting clients’ minimum income requirements while investing in line with their risk appetite.

Despite the challenges, advisers said they were well positioned to support their clients through uncertainty. 

Over a third (35 per cent) said they have adapted their business models and processes for delivering retirement advice during the pandemic, and the research shows a growing use of planning tools to support sustainable income withdrawals.

Steven Cameron, pensions director at Aegon, said: “Maintaining your ‘working age’ lifestyle throughout retirement is the primary objective for many but to truly deliver on this, individuals need substantial savings, a robust financial plan and a clear picture of their future lives.”

He explained that advisers can help to support this and recommend both adequate contribution rates and the best investment approach for reaching goals. 

“They also play an important and ongoing role in determining how much income their clients can take in retirement while minimising the risk that assets are exhausted earlier than planned,” he said.

Based on the research last year, around four in five financial advisers (78 per cent) said they went beyond financial matters and asked retirement clients what gives them meaning, purpose and happiness. 

At the time, the survey found advisers increasingly expected their role to extend into "retirement coaching" and become less focused on solely dealing with products and investments choices.

Inheritance focus

The survey this time also saw an increasing focus on passing on an inheritance with 29 per cent of advisers stating that leaving part of their retirement savings to loved ones was an objective for ‘the majority of clients’.

This is an increase of 5 per cent from the previous year and up 10 per cent from two years ago. 

Source: Aegon research

Aegon said the focus on inheritance is reflected by a comparable rise in the number of clients looking to tidy up their finances through wills and trusts. 

About 60 per cent of advisers agree more clients are interested in updating their wills and trusts than prior to the pandemic.

Cameron said: “The research points to a growing focus on passing on an inheritance, with clients increasingly looking to update their wills and trusts. The pension freedoms have increased the options here with over 55s now being able to access their defined contribution pension pot flexibly. 

“For some, the key consideration is to meet their minimum income requirements sustainably, without running out of money before death. For others, it’s about balancing inheritance aspirations with a comfortable retirement income. These are highly complex areas and advisers are ideally placed to support clients with their options.”

Elsewhere, the research also found the most common client concern for clients was exhausting retirement savings early. 

Some 53 per cent of advisers said their clients were concerned about running out of money before they die, which has risen above worries over health and longevity compared to the previous year.

Cameron added: “Some advisers note that recent market volatility and wider economic uncertainty has meant delivering on clients’ minimum income requirements has been a challenge

 “Looking ahead, there is further uncertainty about the economic outlook, with prices soaring and interest rates low albeit slowly rising. Advisers will have a key role in assessing how this could impact their clients’ ability to meet income requirements, and potentially adapt their strategy accordingly. “

sonia.rach@ft.com

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