Experts: Ali Crossley, Managing Director, Distribution - L&G Retail; Cecilia Furner, Director of Distribution for Retail Annuities – Legal & General; Keith Richards, CEO Consumer Duty Alliance and Personal Finance Society Facilitator: Gilly Green, Business Adviser and Mentor, Director, FoxRed Insight
Headlines:
- Under the FCA's Consumer Duty, firms are encouraged to increase client segmentation and address clients’ unique needs proportionately. For smaller firms, segmentation is often inherent due to specialised client offerings. However, Consumer Duty highlights the importance of targeted approaches to ensure all client groups receive appropriate, tailored support.
- By using segmentation to identify life events that drive clients to seek advice - such as health issues, career changes, divorce, or milestone birthdays - firms can proactively deliver targeted support. For example, addressing financial independence in cases of divorce among clients over 50 is seen as increasingly valuable, particularly as women in these circumstances may face distinct financial needs.
- Many firms indicated that the thematic review led them to expand segmentation beyond just wealth measures. Firms are now incorporating factors like spending patterns, client lifecycle stage, technological familiarity, and more, allowing a more holistic view of client needs.
- Firms also discussed challenges to segmentation, including:
- The need for reliable data and sufficient client volume in each segment for meaningful insights
- Adviser skills are crucial for managing segmented relationships effectively
- Changes in client circumstances may misalign with segment-based assumptions, posing potential service gaps
- Cashflow tools, including Voyant, Opal, and Dynamic Planner, are commonly used to uncover client needs and facilitate in-depth conversations during annual reviews. Some firms use cashflow planning tools at every review as a means to strengthen client understanding and tailor future advice.
- Longevity considerations have altered retirement planning strategies, with some firms now planning until age 100 by default. With more clients expected to enter decumulation, a shift in service needs is anticipated, especially as fewer younger individuals begin accumulating wealth early on.
- Delegates noted the progression of regulation towards an outcomes-focused approach, emphasizing consumer benefits and harm prevention. This evolution - from prescriptive rules to guidance and principle-based approaches - presents an opportunity for advisers, with 92% of industry feedback showing support. Delegates are also providing feedback to the FCA on potential regulatory improvements, especially around duplicative requirements.
Discussion points:
Life events as catalysts
Wealthier clients often delay retirement planning until significant life events occur, presenting an opportunity for advisers to introduce proactive prompts. For example, focused marketing around milestone birthdays or health-related events could encourage earlier engagement.
Balancing granular segmentation with practicality
Firms acknowledged that segmentation must be practical and manageable. While larger firms may have the resources for detailed segmentation, smaller firms can leverage specialised service offerings as a form of segmentation by default.
Enhanced cashflow planning
Some firms are leveraging cashflow planning in every annual review to maintain a dynamic understanding of clients’ evolving needs, especially amid regulatory expectations for outcome-focused assessments.
Navigating longevity and changing client needs
Increased longevity necessitates longer planning horizons, prompting some firms to re-evaluate their services for clients moving into decumulation. This shift underscores the need for innovative retirement income solutions that balance flexibility with sustainable income.
Opportunity in outcomes-focused regulation
Firms largely viewed the shift to outcomes-based regulation as a positive development, allowing for tailored client support while reducing prescriptive compliance burdens. Many are contributing feedback on regulatory pain points and areas for improvement.
Key takeaways:
- Advisers can increase engagement by identifying key life events that prompt retirement planning, using segmented marketing efforts to encourage earlier client involvement
- Expanding segmentation beyond wealth measures—such as by client age, spending patterns, or tech savviness—allows firms to address diverse client needs more effectively
- Consider integrating cashflow planning tools into all annual reviews to identify evolving client needs, support regulatory compliance, and enhance client-adviser discussions
- Firms should prepare for an increased need for decumulation services by designing sustainable income strategies that incorporate longevity planning
- Advisers are encouraged to align with the FCA’s outcomes-based regulatory approach, viewing it as an opportunity to improve client outcomes while streamlining compliance
