The FCA's review into retirement income advice will show there is no shortage of demand for this type of advice, according to Richard Parkin, head of retirement at BNY Mellon Investment Management.
Speaking on a CISI webinar yesterday (February 13), Parkin gave his thoughts on what would be included in the FCA’s Retirement Income Advice review.
He said: “I think we will see the FCA drawing a lot from the DB transfer work it has done because a lot of the themes that were put out in that work should carry across to this review.
“It would be very odd if some of those themes weren’t reflected in this review.”
Parkin highlighted four key themes that he expected to be in the review which included the value of ongoing advice, product suitability, setting objectives and the advice process.
“I hope the FCA recognises the need for ongoing advice in retirement, we know it has been challenging the value of ongoing advice particularly for clients in accumulation but I think you can make a strong case for it in retirement,” he added.
Parkin said the focus of the review won’t be about whether clients need advice but more about what exactly clients are getting when it comes to retirement advice.
He said: “It’s going to be about are you actually delivering it, I was with some advisers recently who said they want to give an annual review but their clients won’t engage.”
Challenges
Parkin said there was going to be an “inevitable” question in the regulator’s mind about whether there is a conflict of interest in advisers recommending drawdown when the potential fees they could receive from delivering ongoing advice from an investment portfolio are so much higher.
“I am very confident that the use of invested solutions would be the right thing given client needs, for many clients they are not relying solely on income drawdown to provide income but the regulator will look at this.”
According to Parkin, the biggest challenge of the FCA’s review is that the context of today is different to when the retirement income advice was given.
He said: “I hope that the regulator remembers the economic climate and market environment looked very different over the past eight years than it did over the last two when asking questions such as why were advisers offering drawdown?”
However, Parkin emphasised that the overarching theme of the review will be that retirement clients have different needs and advisers need to think about them differently.
Future of retirement income advice
Parkin discussed how he thought retirement income advice was going to develop based on research that BNY Mellon had carried out.
He said there would be a move toward goals-driven planning, blended solutions, holistic advice and meeting the needs of Gen X.
“Gen X is going to have much more complicated retirement needs and are going to be much more reliant on their retirement savings than Boomers were and will have more complex circumstances therefore putting everything together will need a much more holistic approach.
“Next year will be the first year Gen X hits 60 so we will definitely see a rotation away from Boomers to Gen X who will have different needs which I think will have some implications for advisers.”
alina.khan@ft.com
