In an insightful interview, IFA Magazine’s Senior Financial Journalist Jenny Hunter speaks to Brooks Macdonald Senior Investment Director Andrew Lewis about his unique journey from professional rugby to the investment industry and his significant contributions to the company’s decumulation strategy. Leading the Wales and West region, he has become a pivotal figure at Brooks Macdonald, bringing a wealth of experience and innovative thinking to the firm’s approach to retirement planning.
A Unique Journey
The transition from a professional sports career to the financial industry is not a common path, yet Brooks Macdonald’s Senior Investment Director has managed to excel in both fields. Reflecting on his journey, he revealed that his entry into the investment industry was a blend of foresight and fortunate opportunities. Having played rugby professionally for a decade, including over 300 matches for Cardiff and 29 caps for Wales, he faced the challenge of career transition after a mid-contract injury.
A conversation with a friend led him to pursue qualifications as a financial advisor and this foresight paid off when he joined Brewin Dolphin, seeking part-time work to prepare for life after rugby. His passion for financial services was immediate, and a subsequent full-time role became necessary after his rugby career was abruptly ended by doctors’ orders.
“I’ve been very lucky in terms of work life. I’ve loved both jobs I’ve done. I fell in love with financial services straight away, which was lucky because six months later, the doctors pulled the plug on my rugby career. I needed to get a full-time job very quickly, but as I said, I’ve loved it from the very outset. So, when you love what you do, it’s not really a job.”
Navigating the UK Retirement Market
Discussing the UK retirement market, Andrew highlighted the evolving landscape and the increasing demand for personalised financial advice. The introduction of pension freedoms has transformed retirement planning, offering more flexibility but also requiring careful management to ensure long-term financial stability.
“There are plenty of opportunities out there. I think when we look at the decumulation, if you go back 15 years ago, there was a fairly simple solution. A lot of people had final salary schemes. Those who didn’t., predominantly had a work scheme which was moving towards buying an annuity.”
Over the past 15 years, significant changes have occurred in pension markets, particularly with the advent of pension freedoms. While these changes have granted retirees greater freedom to manage their finances, they also necessitate robust planning to mitigate the risks associated with market volatility and to secure sufficient income throughout retirement.
“There was a saying that, when you retire, you go from being cash-rich and time-poor to being time-rich and cash-poor, because a final salary or annuity was generally going to be less than your wages. Pension freedoms give people the ability to do the things that they’ve been wanting to do for a while, but with that, you need good planning so you can take more money at the beginning.”
The shift from traditional pension schemes to more flexible retirement options has introduced both opportunities and challenges. While the ability to draw on pension funds offers retirees greater control, it also requires a strategic approach to manage withdrawals and ensure sustainable income.
The Role of Annuities in Modern Retirement Planning
The conversation also touched on the resurgence of annuities as a viable retirement option. Annuities, once considered less attractive, are gaining renewed interest due to current favourable rates.
“In finances, you can never rule anything out. I think annuity rates are looking more attractive. All of a sudden, the option of saying, ‘I know what I’m going to get for the period of time,’ might be a lot more attractive at the moment.”
He emphasised that a one-size-fits-all approach is not feasible in financial planning. Instead, a diversified strategy that incorporates various financial products, including annuities, is essential to meet individual client needs. Annuities can provide a stable income, particularly for those seeking certainty in their retirement years.
“Previously, if you bought an annuity, that was it for the rest of your life. You had some choices at the beginning in terms of whether it was going to be index-linked or inflated or whether it was spousal benefits, and once you made that decision, that was it. I think now, you might see a lot more people being eased into an annuity and considering it for later.”
Crafting Effective Decumulation Strategies
When asked about the necessity of decumulation strategies, Andrew stressed the importance of individualised plans that cater to each client’s unique circumstances. A well-structured decumulation strategy ensures that investments are aligned with future income needs and retirement goals.
“Every client will take money out of a portfolio, whether it’s retirement or anything else, so they require a decumulation strategy. I think whenever someone gets on that journey, you have to look at the investments they have and say, ‘are they still suitable for the job ahead?’ If not, what should be considered?”
Brooks Macdonald’s approach to decumulation involves segmenting investments based on time horizons and expected income needs. This strategy allows for a balanced approach, blending growth investments with more stable income-generating assets to meet both short-term and long-term financial goals.
The timeline for implementing a decumulation strategy is also crucial. Andrew advocates for ongoing client conversations to adapt strategies as needed and to prepare for potential market changes and life events.
“We manage a lot of investments where a client has no plans to retire. However, their investment pot is already big enough to meet their retirement income if they were to go tomorrow. What we do in those circumstances is say, ‘Let’s put a decumulation strategy in place which would allow you to retire tomorrow because you don’t know what’s around the corner.’ There is never going to be a perfect strategy. As much as I’d love to find the ideal solution to everything, life is always evolving.”
Addressing Regulatory and Technological Challenges
The interview also explored the regulatory landscape and the challenges advice firms face in data management and compliance. Andrew highlighted the increasing demands for comprehensive and secure data management, driven by both regulatory requirements and the digitalization of financial services.
“A lot of this came out in the FCA retirement paper, but a lot of it was also ensconced in the consumer duty as well. We’ve all gone a bit more digital. I think advisers are going to be peppered a lot more with requests for data. The unknown element now is we’ve got no history of what that looks like. They will guide you, but they’re not giving you a template to do it. We can’t shy away from the need to keep some data; it’s got to be comprehensive and secure, and it’s also got to be producible in very short shrift as well.”
Looking ahead, he anticipates that the regulatory environment will continue to evolve, necessitating ongoing adjustments and improvements in data management practices.
The Impact of AI on Financial Services
Artificial Intelligence (AI) is another area poised to transform the financial services industry. While AI can enhance efficiency and streamline processes, Andrew believes that human expertise remains irreplaceable.
He envisions AI playing a supportive role, allowing financial advisors to focus more on client relationships and less on administrative tasks.
“I think AI will never replace people, I’m a big believer in that, but I think it will give us all time to spend time with our clients because that’s what the clients value, and not spend as much time entering the data in the background.”
Conclusion
Andrew exemplifies the intersection of diverse experiences and expertise in driving innovation and client-focused strategies in the investment industry. His journey from professional rugby to financial services underscores the importance of adaptability and passion in achieving success. As the financial landscape continues to evolve, his insights into retirement planning, regulatory challenges, and technological advancements offer valuable guidance for both advisors and clients navigating the complexities of modern investment management.
