Summary includes reference to the US where baby boomers hold 80% of net wealth, baby boomers continue to be risk-adverse and hold large amounts of cash, ongoing dependencies, challenges of paying for long term care and confirmation bias.
Headlines
Discussion around who holds wealth/baby boomer considerations
- Reference made to the US where baby boomers hold 80% of net wealth
- Baby boomers continue to be risk-adverse and they hold large amounts of cash – too much
- Ongoing dependencies upon Bank of Mum and Dad
- Challenges of paying for long term care
- Confirmation bias – older generation don’t want to think about future and their health
Key issues and challenges
The future of IFAs
- Shrinking IFA community – what implications does this have for the future? Generation of IFAs who are not looking to progress their businesses/plan for succession
- Someone raised concerns about some IFAs simply encouraging clients to drawdown and invest in a passive for cost reasons, and worries about this
- Is there bias among baby boomers for younger IFAs coming into the market? Most of the table didn’t think so; likening it to trust instilled in junior doctors
- Capacity to bring on new IFAs is falling. There are also challenges around how a prospective IFA would acquire new clients in today’s market
- Will millennials seek an IFA? Many felt that they would, but not at their current life stage. All generations go through the same life stages and for the big decisions like buying a house, marrying, arranging a will and for these step advice will always be needed
Annuities:
- Annuities have fallen out of favour, but for many it remains a dependable retirement tool. With any alternatives, people have to ask themselves an unknown question: ‘Will my pot run out before or after I am gone?’
- Annuities continues to be used by IFAs as a way of explaining risk to their clients. Annuity, lowest risk, is the ‘keep the lights on’ option while the top end risk includes options that will get you the bells and whistles
Conclusions and solutions
- Some tax policies disincentive people from saving more into a pension
- The Chancellor should stop creating new rules for tax wrappers; the concept of a wrapper is a great asset but over complication of it has confused consumers
- There is no scope for innovation in the retirement space, due to European law and Solvency II
- Long term care – difficulties in addressing through products
