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SIMPLYBIZ INVESTMENT SERVICES
The road to retirement has evolved significantly over the past decade . Today , retirees have much more flexibility and need adaptable retirement plans to ensure financial security and a fulfilling retirement . And you , as advisers , play a crucial and valued role in helping clients secure that future . But , with this responsibility comes its own set of challenges and risks .
THE INCREASED REGULATORY BURDEN
The complexity of retirement income options available for clients has necessarily increased the regulatory pressures . In a significant development for the retirement income advice industry , the FCA ' s recent paper , Thematic Review of Retirement Income Advice , found that not all centralised retirement propositions ( CRPs ) were tailored to individual client needs , potentially leading to unsuitable advice .
THE FCA FINDINGS
The FCA ' s findings also provided many instances of poor practice , serving as a wake-up call . These findings underscore the need for :
• A better approach to determining income withdrawal levels
• Refining client risk profiling while differentiating decumulation advice
• Demonstrating better client suitability with a deeper understanding of clients
• Improvements in the annual review process , including the suitability of advice
• Recording customer outcomes and yearly reviews using a robust control framework
THE BROOKS MACDONALD RETIREMENT INCOME WHITEPAPER IN A NUTSHELL
Our Retirement Income : A Whitepaper , published in May in collaboration with The Verve Group , is a practical toolkit designed to address the considerations outlined by the FCA when building a CRP . It discusses what the FCA considers best practice and provides a clear framework for implementation .
In the paper , we detail seven areas to focus on , which are all actionable and designed to help you enhance your retirement income advice services . These areas are highlighted below :
1 . Target market
Have you defined your target market for decumulation advice or services as a business ?
Firms should identify and define the appropriate target market for their CRP and also identify who they do not believe is suitable for the proposition . Consider how your CRP can account for client demographics , income objectives , level of experience and category , age limits , minimum assets value required , and the nature of the advice provided .
Takeaway : Who will you work with or not work with for active decumulation ?
2 . Scope of advice
What does the scope of this advice look like ? Is it independent or restricted ? Is it holistic or product-based ?
The nature and scope of firms ’ retirement income advice services should be clearly defined and appropriate for their target market . What services does your firm offer for retirement income advice , and how do they meet the needs of your target market ? These are key , as are noting if there are any limitations to the services your firm offers .
Takeaway : How do the services your firm offers meet the needs of your audience ?
3 . Your service proposition and charging model
How does your service proposition differ in decumulation to accumulation ? Does your charging model change ? How will you monitor whether this is working ?
The FCA has again confirmed that they do not wish to be a price regulator . However , they have raised concerns about the durability of charging models when portfolios reduce over time through withdrawals , as fees calculated on a percentage basis will also fall . It raises the question : is it possible to provide the required level of service as charging revenue decreases ?
Takeaway : How appropriate are your charges for the strategy recommended ?