Expert: George Pullar, Partnerships Development Manager, LV= Facilitator: Sam Shaw, journalist and consultant
Headlines
- Tailored strategies for retirement planning, particularly for clients in decumulation include personalised approaches to risk profiling, sustainable withdrawal rates, tax-efficient drawdowns, and legacy planning
- The limitations of traditional risk profiling tools often rely on static scores. A holistic assessment approach that considers clients’ life events, wealth levels, and unique goals, supporting a ‘risk composure’ model where each financial goal may align with a distinct risk profile would be more beneficial
- The value of specialised decumulation products versus adapting accumulation strategies. Flexibility is key in balancing income needs, tax efficiency, and legacy goals, with options ranging from natural income solutions to balanced equity and fixed-income exposure
- Sustainable withdrawal rates were a key focus, given rising life expectancies and the potential for increased care costs. Gender-based insights included findings that more women than men preferred stable retirement income streams, impacting how advisers tailor drawdown strategies
- The importance of tax-efficient drawdowns, using tax wrappers and estate planning tools to balance retirement income with legacy goals. The need to balance client priorities with compliance
- The practicalities of serving clients across wealth levels, from modest assets to high-net-worth individuals
Discussion points:
Complexities of risk profiling and client attitudes
Risk profiling is complex and often inadequate when simplified to numerical scores. Delegates advocated for holistic profiling that considers individual circumstances, suggesting a ‘risk composure’ framework that views various client goals as aligned to different risk profiles. This approach empowers clients to see risk as manageable and necessary for achieving retirement goals.
Investment flexibility for decumulation clients
Advisers highlighted the need for decumulation-specific investment approaches, supporting options that offer flexibility based on income needs, tax efficiency, and legacy goals. FCA mandates on labelling investment services may influence how advisers’ brand and adapt their offerings.
Strategies for longevity and sustainable withdrawals
Ensuring sustainable withdrawal rates is a growing concern, particularly given the longevity expectations of modern retirees. Gender-based data shows that women often favour steady retirement income, impacting personalised planning strategies. Regular reviews and adjustments in response to evolving needs were recommended for advisers.
Tax-efficient drawdown and compliance challenges
Drawing down assets in a tax-efficient way while balancing legacy goals is essential. The group emphasised compliance with FCA scrutiny on withdrawal rates and other tax strategies, encouraging a blend of efficient drawdowns with compliance diligence.
Tiered services for clients with varying wealth levels
To efficiently service clients of different wealth levels, participants suggested scalable service models, including junior advisers for clients with modest assets. Advisers recognised the importance of relationship-building, particularly with clients likely to inherit wealth, as wealth transfer trends grow in importance.
Key takeaways:
- Evaluate whether separate decumulation platforms or fund selections could benefit clients transitioning from accumulation, focusing on tax efficiency, risk tolerance, and income stability
- Revise risk profiling to include a comprehensive assessment of clients’ goals, circumstances, and risk capacity. Consider multi-step profiling with client self-assessment, followed by adviser input, to ensure a nuanced understanding
- Regularly review and adapt withdrawal rate models for clients, factoring in longevity risks, potential care needs, and market volatility. Ensure that modelling aligns with current FCA standards and client preferences for stable income
- Evaluate the firm’s strategies for tax-efficient drawdowns and legacy planning, maintaining compliance with regulatory standards while focusing on client legacy objectives
- Investigate tiered services, using junior advisers and technology solutions to maintain efficiency for clients across different wealth levels. Strengthen relationships with clients likely to inherit wealth to support future client retention
