Choosing to upgrade retirement advice models will be a “worthy New Year’s resolution” for advice firms, according to Just Group group communications director, Stephen Lowe.
Lowe predicted advisers who are unhappy with the amount of innovation in the retirement income world in recent years “should now be seeing more options from discretionary fund managers”.
These new options “combine the strengths” of guaranteed income producing assets and other asset classes.
He added that helping clients at and in-retirement is going to be the big growth sector of the coming decades and, as a result, advised upgrades to advice models.
Lowe said advisers eyes will soon be on the Financial Conduct Authority's thematic review of retirement income advice which is probing whether firms are properly understanding the needs of their retiring clients.
This is a step beyond the current situation, according to Lowe, in which two similar retirees with similar objectives could get very different recommendations from different firms, or even different advisers in the same firm.
The outcome of the review, which is expected in the first quarter of the new year, is “likely to set the regulatory direction of travel for adviser firms through 2024 and beyond”, Lowe stated.
He also said the regulator will want evidence of clear differentiation in the way risk is assessed and the way advice is informed and constructed between clients who are saving and clients who are spending.
Lowe also said he thought the FCA may push for a greater focus on personalisation, and a recognition that advice models for retirees should primarily focus on managing risk to income rather than risks to capital.
Pension freedom
Lowe pointed out that March 19 2024 will mark the 10-year anniversary of the pension “freedom and choice” reforms being announced in the Budget.
The repercussions of the removal of the cap on how much can be taken from a pension “continued to be felt” today, but Lowe also questioned “are they working?”.
He explained: “We still don’t have good data on how retirees are using their funds in aggregate and whether the amounts being taken are sustainable, and there is no current data on whether the reforms are making people better off.”
General election
Lowe also looked ahead at one of the biggest upcoming events of 2024, the general election, pointing out that the main political parties will already be preparing grounds for their manifesto promises.
He said the size of the “mature” vote means it is “likely” to be key to success so, all being equal, the industry should be looking forward to seeing some innovation in pensions and adult social care.
However, Lowe cautioned that “it will surely take a brave bookie to give odds on the triple lock losing its protected status or a leading political party risking its neck on a new social care policy this side of a General Election”.
tom.dunstan@ft.com
