Riccardo Spella, Sales Director at M&G plc
Yep – Times they are a-Changing.
As the saying goes the only constant in life is change. Change which happens with a big bang and knocks you sideways, change which is incremental and creeps up on you and everything in between. We react to it all.
Pension Freedoms – that WAS a big bang. Changing demographic needs however, well they can creep up on us. As an industry we all know that it’s our near or at retirement clients that tend to hold the most assets and drive the majority of our fees. Pension freedoms may have come in seemingly overnight a few years ago, but clients, advisers and the regulator have and are still taking their time to fully understand and adapt to these changes.
With Consumer Duty asking everyone to look at whether their propositions are providing clients with value for money, it’s inevitable that the light shines again on the retirement sector. The basic questions are what are you doing as an adviser to ensure your clients get the retirement outcomes they are after and, as you try to achieve this for them, how are you managing the inherent risks. These simple requirements have encouraged advisers to review their processes and propositions, even those who had historically nailed down their Central Retirement Proposition. And with ongoing uncertainty around interest rates and inflation, times are a-changing and (in the words of the legend Bob Dylan) “he that gets hurt will be he who has stalled.”
What do I mean?
- Cash rates and yields are in a different place to where they were a couple of years ago.
- Asset diversification has moved away from the traditional 60/40 split and now often includes alternative assets to help with “the new” negative correlation thinking
- Other thinking out there compares traditional multi asset drawdown vs the benefits of smoothing, or a combination, in terms of income sustainability (take a look at this discussion paper from the University of York for an alternative view)
- Annuities also now look like a more appealing option for some.
- Slightly counterintuitively, some analysis tools show lower risk portfolios can generate a more sustainable income.
- And Inflation is most definitely now a thing and that changes all of the numbers.
So if you have or haven’t historically got your CRP sorted, if you are thinking about potential impacts of Consumer Duty on your proposition or even maybe you’ve got one eye on the Regulators current Retirement Income Advice Thematic Review – think about what’s changed in the market since you formed your opinions and approach.
One thing is for sure, in the current world there isn’t a one size fits all solution so you need flexibility. We are seeing Increased adviser demand for an insured smoothed fund blended with their standard CIP in pre and post retirement.
And with retiring clients covering a number of different solution segments, being clear how the options in your CRP cope with this is important as is having a platform which offers efficiencies across the board, for all retirement solutions.
If you want to find out more you can visit the M&G Wealth Platform website.
I’ve been working in financial services since 2006, moving into the platform space in 2010 with AXA Wealth and then onto M&G Wealth Platform (formerly Ascentric) in 2016.
Now part of the wider M&G plc, I am excited by the growth prospects of the M&G Wealth Platform and how this will benefit our supporting advisers firms.
Having spent the first five years of my financial services career as a paraplanner in Glasgow, I understand the importance of the adviser/client relationship and our role in meeting you and your clients’ expectations.