Retiree investors are “shoehorned” into processes designed for savers rather than spenders, according to NextWealth's latest report.
The study revealed that an understanding of risk is uncommon, even among seasoned investors.
Advisers said the same risk-management tools are used for the accumulation and decumulation stages of life, despite clients in the latter facing more complex risks.
Of the more than 200 advisers surveyed, 59 per cent said they use the same tools.
Overall, the report found risk profiling tools had limitations in demonstrating personalised risks, resulting in 56 per cent of advisers taking a manual approach to meeting retirement income requirements compared with a third who use a tool.
Kavi Myladoor, retirement income director at retirement specialist Just Group, a partner of the report, said: “This research suggests many retiring clients are shoehorned into the processes designed for savers rather than spenders.
“The use of tools and processes specifically designed to manage retirement risks – sequencing risk, longevity, income risk, etc – is far less common than could be expected.”
She added this leads to advisers having to manually fill in the gaps which means there is the chance of misunderstandings.
Myladoor said: “Currently there is a high likelihood that two clients with similar resources and objectives could receive wildly different retirement recommendations, not only from different firms but from different advisers within the same firm.”
The report, Guarding Financial Future, said less than a third of financial advisers are ‘very confident’ in their ability to manage key risks for clients in decumulation while around a tenth are ‘not at all confident’ in their ability to manage sequencing risk.
NextWealth founder Heather Hopkins said advisers need better access to tools which set out risks faced by retiring clients.
She said: “This report highlights a need to provide financial advisers with the right tools to consistently assess risks faced by customers in retirement as well as to map these risks and a customer’s financial objectives to the right solution.”
tara.o'connor@ft.com
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