Defaqto, the independent financial information and technology business has launched its hotly anticipated Income Drawdown workflow within its financial planning software, Defaqto Engage.
Defaqto’s unique Income Drawdown workflow, which is free to existing Engage users, allows advisers to assess the impact that drawing a regular income has on a clients’ accumulated wealth.
As with accumulation strategies, the Income Drawdown workflow factors in the probability of volatile markets but, importantly, it also considers the potential impact of sequencing risk. Something that, to date, other financial planning software tools don’t do.
Having understood the client requirements in terms of income level and duration, the adviser can use Engage to calculate the sustainability of that income using different asset allocations. They can also look at the potential impact of sequencing risk, both concerning its effect on the longevity of the income stream and the residual value left at the end of the term.
The new workflow is end-to-end. It not only models the situation but also identifies a selection of suitable investment funds.
Defaqto Income Drawdown compares three scenarios:
- Keeping the investments in the current investment solution
- Moving investments to funds specifically assessed for decumulation
- Or, buying an annuity
Pan Andreas, Head of Insight and Consulting (Funds and DFM) comments: “Our income drawdown workflow has been a long time in the making. This workflow provides a step-change in the right direction for advisers with clients in the decumulation phase. This year, in particular, has been challenging. But sequence risk always plays a role and advisers need tools that work seamlessly within their advice processes. Defaqto Engage works intuitively with the adviser. It is flexible, but also provides workflows that streamline the adviser decision-making process.
“The majority of investment workflows were originally designed to cater for the accumulation phase. As such, they mostly ignore the effect of sequencing risk when clients move to decumulation. They do little to highlight the appetite and capacity to bear income fluctuations when planning clients’ income in retirement.
“With our Income Drawdown workflow, advisers no longer have to create a fragmented report from several tools. Using an actuarial model, provided by Hymans Robertson, we’ve created an invaluable workflow that produces provider agnostic research specifically developed for decumulation.”
To find out more about Defaqto’s Income Drawdown workflow or to book a demo of Engage, click here.