Only 20 per cent of advice firms intended to adjust their investment strategies for clients entering retirement at the beginning of this year, according to Copia.
According to the report titled ‘Rethinking Retirement: Changing Gear,’ which was a collaboration with The Lang Cat, only 17 per cent of businesses offer something different for retirement than their Centralised Investment Proposition (CIP).
Nearly 3 per cent of clients choose custom portfolios in retirement, whereas about 80 per cent of clients use the same model portfolios for both the accumulation and decumulation phases.
Only 20 per cent of participants want to modify their approach within the upcoming year. The top three reasons given include changes in client preferences (31 per cent) and regulatory concerns (73 per cent), as well as how the firm’s investment philosophy is affected by economic developments (27 per cent).
The report found that individuals who take income are becoming more interested in guaranteed and smoothed investment products. For some of their clients who are in retirement, 57 per cent of respondents use these goods. Furthermore, 26 per cent of respondents are reevaluating their strategy in light of rising interest rates and gilts, and 30 per cent have increased their usage during the last two years.
Copia managing director Robert Vaudry says: “In our research, only a fifth of firms said they were planning to make changes to their approach to retirement income. Given the findings of the thematic review, it now seems that some firms appear complacent in their decumulation approach. With the FCA’s focus on the importance of considering the sustainability of income and the specific risks faced in retirement to avoid clients running out of money too soon, we expect far more firms will now be reviewing their processes to make sure they meet and are evidencing, the regulatory requirements.
“Deciding how and when to start the transition from accumulating wealth into decumulation is one of the most challenging financial decisions an individual will face in their lifetime. With the introduction of pension freedoms, the decline of defined benefit schemes and the rise of defined contribution schemes and auto-enrolment, these choices have become more complex.
“Advisers have a crucial role in helping clients decide not just how they finance their retirement, but also the level of income to draw and an appropriate investment strategy for funds that remain invested. DFMs have an important part to play too, in designing, building and managing investment solutions that mitigate decumulation risks and meet client objectives, including providing a sustainable income throughout later life.”
The post Majority of advice firms unprepared for retirement investment changes appeared first on Corporate Adviser.
