Advisers are adapting their approach to retirement planning for clients, due to changing circumstances, ongoing economic challenges and a new regulatory backdrop a survey from BNY Mellon Investment Management has revealed.
Three quarters (75%) of advisers said that inflation and the cost of living are current concerns for their clients, when considering retirement income.
Two thirds (66%) of advisers also indicated that market uncertainty is a key worry for their retirement clients.
Changing family dynamics were highlighted too with more than a quarter (29%) of advisers referred to retiree client concerns about the rising cost of supporting their family.
As a result of these pressures, 67% of advisers believe their clients will choose to delay retirement and 56% expect clients to reduce pension withdrawals.
The survey also revealed that more than half (51%) of advisers view meeting client expectations as their biggest business challenge over the next few years. Just under half (44%) said that clients moving money from investments to cash savings is a potential issue for their business.
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Richard Parkin, head of retirement at BNY Mellon Investment Management, said: “The higher cost of living coupled with poor market performance means clients need their advisers to help them get more from less.
“While we expect these challenges will continue to drive demand for retirement advice, advisers are having to help clients reassess what retirement means for them and build realistic plans to achieve this. Part of this involves ensuring clients are invested appropriately to support these plans. While markets remain challenging in the near term, advisers can ensure clients are invested in longer-term opportunities.”
Regulation
Nearly two thirds (61%) of the advisers surveyed also highlighted the challenge of changing regulation.
More than half (54%) expect to make greater use of cash flow planning in the next one-three years while 62% said they were influenced by the regulator’s view of the importance of this tool.
Just under a quarter (23%) of firms believe they need to make changes to their retirement-income investment strategy.
Nearly two thirds (61%) of these firms cited regulatory expectations that advisers use a different set of portfolios for clients in decumulation, from those they use for clients still accumulating wealth
Parkin added: “Our research suggests some advisers are uncertain about the long-term impact of the consumer duty and precisely what, if any, changes need to be made to their retirement advice approach.
“The FCA’s current thematic review of retirement-income advice should hopefully provide some guidance, but firms already anticipate a need to further tailor their approach to retirement clients’ specific needs. We expect that these changes along with shifting economic and market conditions will prompt advisers to reassess the products and portfolios they use for retirement-income clients.”
Longer-term impacts
The report indicated that advisers are considering more fundamental changes to their business models, including a wider range of advice services.
Some 44% expect to have greater involvement in long-term care planning and 42% see an increased role around providing housing advice.
While nearly a quarter (22%) said they expect lifestyle coaching to become more of a focus for advisers in the next three years.
Parkin, concluded: “One thing that won’t change is the importance of the adviser relationship. Amidst all this uncertainty, the opportunity for advisers to serve as trusted guides and to help their clients navigate these challenges will only grow.”
