Rising inflation and higher volatility are causing a ‘perfect storm’ in advice firms’ retirement processes, and underlying the need for evolving processes, research has said.
Uncertainty in financial markets means advisers and their clients are balancing a number of risks, including longevity, inflation, investment and sequencing risks, which are all presenting real challenges to income sustainability in retirement.
In a survey of 200 advice firms by AKG on behalf of Investec, respondents were split as to whether the advice given to clients near retirement should be outsourced or not.
Some 63 per cent of advisers said they outsourced their CRP to a discretionary wealth manager, with the remainder organising the CRPs inhouse through their own discretionary permissions.
The report calls CRPs, which it said are a distinctive and separate centralised investment proposition for clients moving into income drawdown or phased retirement, the “new kid on the block”.
More advice firms are using CRPs, with three quarters of respondents saying they had already launched a centralised retirement proposition, with one fifth planning to do so in the next 12 months.
The report said the “comprehensiveness” required to formulate a good retirement planning service should not be underestimated, and highlighted the 66 per cent of advisers who said their firm does not include a consideration of discretionary and essential income requirements in its CRP.
Half (53 per cent) of advisers said their firm’s CRP does not including a taxation policy, and 47 per cent said it did not include a consideration of guaranteed income.
“Where firms do not have a policy on some of these items they might need to consider whether they are missing any vital component parts of their retirement planning services,” the report said.
Communications director at AKG, Matt Ward, said while the survey indicates widespread CRP adoption, there are potentially “contrasting views” from the adviser firm interviews with some suggesting that CRPs are only emerging.
“A key concern for some firms is that a CRP might compromise independence if there is too close a tie to a specific product or provider.
“Perhaps (in CRP) it is more a case of ‘P’ for processes for adviser firms and ‘P’ for proposition in the minds of providers, platforms, DFMs and asset managers.”
Head of strategic partnerships & platforms at Investec Wealth & Investment, Simon Taylor, said the research showed that “none of us can act independently”.
“As far as we can see, the biggest challenge for advisers is managing the behavioural and business risks that serve to make CRPs a compelling solution for the future.
“Indeed, the bucketing approach is becoming central to solving dilemmas which are exacerbated by the current market conditions.”
sally.hickey@ft.com
