Pensions 

What's keeping advisers awake at night?

What's keeping advisers awake at night?

It’s a crazy world for advisers to navigate at the moment, with the uncharted waters of Brexit posing challenges, and political risk clouding investment decisions. We asked them what are the big issues keeping them awake at night, and how they are managing client portfolios in light of these concerns.  

Martin Dodd, Midlands Investment Agency, Wolverhampton

Defined benefit doom

What’s keeping me awake at night is the amount of defined benefit pensions transfers going on.

I’m not doing much of this myself but, anecdotally, from speaking to product providers and the people doing the transfer value analysis reports, it seems like there are a lot going on.

I’ve been in the industry 30 years and I’ve seen it all before. This to me looks like the pension review all over again.

Advisers are probably inadvertently being incentivised to move pensions. From what I hear, the volume of it is very high, even product providers think there is too much going on.

The FCA is well aware of all this. If I have looked at 10 DB pensions, only one of those would justify a move.

Transfer values have gone up enormously because of the reduction in gilt yields, but if people move their pensions they could run out of money and they won’t know this is going to happen until years later when it is too late.

With the best will in the world, any of us could be swayed – if anything looks grey, we could decide to move it.    

Trystan Lewis, Griffin Wealth Management, Chester

Babies and Brexit

I have a 10 week old baby who is keeping me awake at night but, in the advice and investment world, it’s Brexit which is the worry.

The fact stock markets have done well for a good number of years means there is nervousness over what could happen with the economy.

We have had a few years of slow recovery and, with Brexit, we might have a few more years that are a bit more difficult.

I’m not changing anything in client portfolios because we don’t speculate, this recovery might continue for a couple more years or there could be hurdles to overcome, and it will remind clients that there is risk out there.

Nothing has upset markets for a number of years, but given where we are in the business cycle, we could be entering a more difficult phase. Clients who will need to take money out of their investments in the next few years might be more cautious.

The other concern is what’s been done since 2009 to shore up the economy – quantitative easing will reverse at some stage, it has artificially pushed up asset prices, and interest rates will go up.

Potentially we have got a generation coming through that has never seen interest rates above 0.5 per cent. The economy has been on life support for some years and, when it ends, people will have to make sure they have got their finances in order.

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