Suitability must be the number one concern for advisers when assessing whether a client should go into drawdown, advisers have been warned.
"Simply put, suitability is good, old-fashioned advice. It is an iterative process as adviser and client discussions can often go round in circles until the best solution is decided. You can’t robo that.," William Burrows, retirement director for Better Retirement, said.
Drawdown decisions - where retirees convert their pension pot into a retirement income, which usually involves some part it being exposed to markets - should focus on suitability before anything else, other market players agreed.
Femi Folorunso, senior consultant at Mattioli Woods, said: “You have to really know the clients to assess suitability for drawdown. Only by following a review of a client’s circumstances and needs can the appropriate structure be recommended”.
According to research from Retirement Advantage earlier this year, 42 per cent of people aged 55 and above said they were planning to seek financial advice at retirement, up from 38 per cent in August 2016.
Fiona Tait, pensions technical specialist for Intelligent Pensions, commented: "Consideration must be given to the minimum income level which the client needs to meet basic expenses, how best to secure this and the degree of risk they can afford to take with their portfolio."
She said this would be done most effectively using a cashflow model which she said would provide the client with a "visual representation of their future income, and how their pensions and other assets can be employed to match the desired pattern".
Mr Folorunso highlighted some of the ongoing considerations an adviser should bear in mind:
• Income needs.
• Wealth.
• Other income sources.
• Health.
• Duration of drawdown.
• Attitude to risk.
However, according to a spokesman for LV, “safety first” should be advocated when it comes to creating a suitable retirement plan for clients, regardless of whether this is drawdown or not.
The spokesman says: “This should protect essential income first and enable consumers to enjoy some flexibility without gambling on security.”
Find out more
Read FTAdviser's Guide to Blended Drawdown, which will qualify for approximately one hour's CPD.
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