David Owen was a fan of centralised retirement propositions, then the markets changed.
The wealth proposition director of The Openwork Partnership says recent bond and equity movements, coupled with higher interest rates and inflation, have made it impossible to group clients into centralised product strategies for retirement income.
He points to market falls last year, following the ill-fated "mini-Budget", which saw the inverse relationship between equities and bonds uprooted as both asset classes lost value simultaneously, meaning fixed income's traditional role as diversifier was rendered ineffective.
For many people at the beginning of their retirement this would have had very damaging consequences due to the risk of pound cost ravaging, the effect of having to cash in increasing amounts of the pension fund to support a regular income when markets are falling.
It goes to show that centralised product solutions for clients have lost their place in retirement planning, says Owen. Though he does believe in streamlining the advice process.
"Central retirement proposition was a really good idea until inflation rates went up," says Owen.
"Those models worked until the pandemic. But bonds for a period of time weren't a secure asset. So that would have been the wrong solution for clients.
"A central retirement proposition is perfect if it's an evidence-based advice framework, it doesn't work if it's a 'I've got a great idea for you, if you put all your clients' assets in this they're all sorted'.
Streamlining advice
Openwork uses a suitability of advice framework covering the client journey from the first meeting with their adviser to the end result, which ensures some uniformity in the way retirement advice is given.
This covers all the steps advisers need to follow to give clients the optimal result. A centralised system then monitors whether this has been the case.
The system works on the premise that everybody's retirement goals are different, so their product mix is different, but the approach to advice is the same.
Owen says: "Products are useful but what we're going to have to remember is every client is absolutely unique and they've got a unique amount of assets in different places to use in different ways to do unique things in their retirement.
"And I know we can have target markets and stuff like that. But the target market is somebody who wants to retire and can have a meaningful and purposeful existence in that retirement and stay healthy and fit."
He says with what happened last year in markets and the economy, the product mix for retirement income has changed.
With bonds falling, against a backdrop of rising interest rates, cash has "become really interesting, and so have annuities", he says.
The typical drawdown rule would be to take 4 per cent but nowadays it is possible to get a rate of 4.75 per cent inflation-linked from an annuity, he adds.
