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Chapter 2 of 3

publication in association with A special

A special three-part insight

into the challenges facing the


Retirement Planner | Chapter 2


uch has been said about the need for more education around retirement options, particularly after the Budget. But these conversations tend to revolve around the general public rather than advisers.

However, if advisers are to provide the best service possible, then they too need help to keep on top of the latest developments and innovations in this fast moving market.

In this, the second chapter of our retirement income research, we asked advisers to tell us where knowledge gaps lie and who should be helping them.

As expected, areas such as flexible drawdown and overall retirement planning strategies were highlighted as areas advisers want to know more about. It was also clear that advisers are taking a closer look at more alternative type annuity products such as fixed-term annuities.

These moves point to a retirement future that looks very different to the traditional view. Advisers will take more of a portfolio approach to retirement, with annuities being purchased in slices so retirees can remain invested for longer.

However, who should provide this education? To this, we received a decidedly mixed response. While some believe providers should step up to the plate, there are others who believe they should not be involved.

One participant urged providers to take a different approach to education by moving away from “product pushing.” However, another said providers should be involved as advisers need to understand the products they recommend to clients. It will be interesting to see how the provider role develops.

Similarly, many survey participants highlighted the role of agencies such as the Institute of Financial Planning and the Chartered Insurance Institute in educating advisers. These bodies already play an important role in educating advisers and they will be expected to do more as time goes on.

But Chapters Financial’s Keith Churchouse took issue with the examination papers issued by such bodies. According to Churchouse, ambiguously worded questions on these papers cause confusion and often lead people to fail. If people fail these exams because of this, they can become disheartened and look to leave the industry so this is an area that should be looked at more closely.

We are entering a period where people’s views of retirement are changing rapidly and advisers are vital to helping people make appropriate decisions. It is of the utmost importance that advisers receive the education they need to do this.

Helen Morrissey

is editor of Retirement Planner magazine

From the Editor


the key to better advice

Advisers are vital to

helping people make

appropriate decisions. It is of

the utmost importance that

advisers receive the education

they need to do this



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Back to school: What

support do advisers need?

In the second of three special in-depth Inquiries into the retirement planning market,

Retirement Planner

– in conjunction with

Scottish Widows

– looks at how fi nancial

advisers and their clients can benefi t from the changing industry

At a glance

• Educating clients on retirement planning strategies important • 80% say advisers should play a key role • Clients do not have a good idea of their income needs


he retirement market has evolved so much over recent years that advisers have faced challenging times keeping up with the raft of new legislation and products coming into the market. Understanding how different products can be utilised to meet client needs is a vital part of an adviser’s role, and they need support and guidance in terms of understanding products, as well as where they fi t into the retirement planning landscape.

But where should this support come from and how should it be delivered? Are there any areas in particular that advisers need more support on? In this month’s Inquiry, we asked survey participants to

outline their top three educational needs in retirement market at the moment. Support with overall retirement planning strategies came out on top with 64% of the vote. The growing importance of auto-enrolment was also highlighted, with 40% of those who answered the question highlighting this as an area where more education was needed.

Perhaps unsurprisingly, fl exible drawdown was also proving popular with 30% of advisers citing this as an area they need more education on. Following closely behind were fi xed-term annuities and SSAS, with 29% each. Fixed-term annuities have been steadily gaining traction over recent years and so it is expected that


Retirement Planner | Chapter 2

they would be an area advisers want to know more about. The inclusion of SSAS is perhaps less expected given they currently only account for a relatively niche part of the pensions market (see chart one).

Where does support come from?

We then went on to ask advisers where they felt this support should come from. The overwhelming response was that product providers should play a central role here. One participant said: “Providers should provide the information and training for their product set,” while another said: “Providers. Note the plural. They know their products.” However, another participant was not so sure about the role of providers in educating advisers, saying that providers only provide “education to sell their wares”.

Chapters Financial director Keith Churchouse agrees saying that while providers have a place in educating advisers their approach needs to change.

“There is a huge amount of improvement to be done as I think providers sometimes miss the point. Advisers go to events run by providers to get CPD points. But then if they get a product rammed down their throats, there is a risk they will switch off and they don’t get the education they went in there for.

“Advisers are an inquisitive bunch and want to develop the best service for their clients. They don’t want a product push.”

However, The Retirement Adviser’s managing director Nick Flynn has a slightly different view: “A combination approach works well, but overall it is the adviser’s responsibility to address any knowledge gaps they have. We know providers have a vested interest, but advisers do need to understand how the products work.”

1. What are your key education needs

in the retirement market?

0 10 20 30 40 50 60 70

Retirement planning

strategies 64%

Auto-enrolment 40%


drawdown 30%

SSAS 29%


annuities 29%



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2. Who should be playing a role in helping clients

understand their retirement planning needs?

0 10 20 30 40 50 60 70 80 90

IFAs 64%

The government 74%

Pension providers 61%

Employers 57%

The media 55%



Regulators and professional bodies were also a popular choice, with many believing the likes of the Financial Conduct Authority (FCA), The Pensions Regulator, the Chartered Insurance Industry (CII) and Personal Finance Society should take a leading role.

But while he agrees that the likes of the CII should play a role in educating advisers, Churchouse does believe the current approach needs to change. Looking at the examinations offered by such bodies, he says the ambiguous wording of many examination questions can lead to advisers failing exams they might otherwise have passed.

“We have taken on apprentices who have tried

unsuccessfully to complete the RO1 exam. They are degree educated, so they are intelligent people. There are some interestingly worded questions in these exams and my concern is that if someone fails this exam a couple of times, then they could decide to leave the industry. What will happen to adviser numbers then?”

Who educates the general public?

We then moved on to asking our readers to tell us how the general public should be educated on retirement issues. By and large, the British public has little knowledge of pension and retirement matters, and there is great debate as to who should take the lead in educating them.

Unsurprisingly, more than 80% of respondents said that advisers should be playing a key role in helping people to understand their needs.

However, while they do without doubt have a key role to play in educating people, concerns remain as to whether the vast majority of people are willing or indeed able to pay for financial advice. Elsewhere, 74% said they felt


Retirement Planner | Chapter 2

the government should be playing a role, while 61% said pension providers should be doing this. Despite employers being cited as playing a major role in educating staff, only 57% highlighted them here. Other parties such as the media and banks were also identifi ed as having a key role to play (see chart two).

When asked for more details, the survey participants also mentioned several other parties who could be doing more in educating members of the public. The FCA, along with The Pensions Advisory Service and Money Advice Service, featured prominently, as did the idea of getting more fi nancial education in school.

However, several participants also pointed out that clients themselves need to bear some of the responsibility for educating themselves about retirement matters, with one participant saying: “Everyone on the list has some responsibility to a degree, but the client should take responsibility to seek information.”

Changing view of retirement

The recent changes announced in the Budget has brought the importance of fi nancial education into focus. People have been granted unprecedented fl exibility over their retirement income and this fi ts in well with people’s changing retirement patterns.

There has been plenty of change for advisers and their clients to get to grips with. According to our research, 67% strongly agreed that the concept of retirement is becoming more fl exible than in the past. A further 30% agree with

Nick Flynn,

The Retirement Adviser

3. How much would you agree with the statement:

“The concept of retirement is becoming more fl exible

than in the past”?

Agree 30%

Disagree 2%

Strongly agree 67%

Strongly disagree 1%

The way people

are approaching

their retirement has

completely changed.

The only thing many

people remain a bit

short-sighted on is that

they still underestimate

how long they are



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Keith Churchouse, Chapters Financial

the statement, while only 2% disagreed with the concept and 1% strongly disagreed with it (see chart three).

However, one of the biggest challenges an adviser faces when working in the retirement market is helping clients to understand what their income needs are likely to be. We are all working longer, which means we spend longer in retirement, and this needs to be funded in some way. Added to this is the potential for ill health and long-term care needs. Are these issues that clients are aware of and willing to plan for?

It would seem not. When we asked survey participants to tell us whether their clients had a good understanding of what their income needs are likely to be, 81% said no (see chart four).

Despite this, it would seem that people are increasingly understanding the need to access fi nancial advice in the run-up to retirement. When we asked our readers to tell us whether they have noticed a change in how clients have approached their retirement planning over the past fi ve years, almost half (47%) said they felt people were increasingly looking to seek advice from fi nancial advisers about all aspects of fi nancial planning. But a further 34% said they felt their clients’ needs had remained the same (see chart fi ve).

“The way people are approaching their retirement has completely changed,” says Flynn. “There is massive choice out there, but people are starting to plan and think about paying off debt, maybe buying a buy-to-let, etc. The only thing many people remain a bit short-sighted on is that they still underestimate how long they are likely to live.”

4. Would you say that your clients have a good

understanding of their income needs in retirement

before coming to see you?



No 81%

Advisers are

an inquisitive

bunch and want

to develop the best

service for their clients.

They don’t want a


Retirement Planner | Chapter 2

6. What do you see as being the main

thing(s) that you can offer your clients

when they come to visit you first?

0 10 20 30 40 50 60 70 80

Put a plan in

place for them 77%

Simplify their

decisions 64%

Give them peace

of mind 64%

Give them a

reality check 57%

Confirm their

worries 20%

the same percentage said they were able to put their clients’ minds at rest.

Just as important was the need to give clients a reality check about the state of their finances, and this was an option highlighted by 57% of participants. A further 20% said one of the important things they had to do was confirm their clients’ worse fears (see chart six).

A change of mind?

The retirement market has changed massively in recent months and this has piqued people’s interest, particularly when it comes to accessing pensions as a lump sum. Many in the industry have expressed concern that this will hap-pen on a large scale leading to problems further down the line when people run low on funds.

According to our research, only 17% of participants believed more than 50% of clients would take their pension as a lump sum. Just 43% said they thought between 10%-50% of clients would look to do this. More than one in four (41%) thought less than 10% of clients would take advantage of this option.

Churchouse thinks that while people are initially interested, the majority will decide against this course of action once they understand the tax implications.

“We’ve had more enquiries over the summer period as to what can be done with a pension. [Chancellor] George Osborne’s announcement was a massive surprise to the industry and while advisers got to grips with it fairly quickly, I’m still not sure the public understand why this is happening. Effectively, Osborne is swapping government debt for taxable receipts and once people realise the tax take involved, then many realise that is not what they want to achieve.”

5. Have you noticed any changes in the way clients

approach retirement planning in the past five years?

Yes, they are


seeking advice

from IFAs about

all aspects of

financial planning


No, I think

their needs

have remained

the same


Yes, there is an

increasing tendency

for them to make

their retirement plans

without an IFA


Yes, but for a

different reason


Advisers have been working hard to highlight how their advice can make a real difference to their clients’ outcomes and we asked them to articulate how they are able to do this. More than three quarters (77%) said the main thing they can offer their clients when they first establish a relationship is the ability to put a financial plan in place for them.

Almost two thirds (64%) said they were able to help clients simplify the decisions they needed to make, while


Editor: Helen Morrissey – 020 7316 9809 Art & production editor:

Ravi Meah – 020 7316 9820 Head of production: Dan Parker – 020 7316 9238 Managing director: Jonathon Whiteley – 020 7316 9545 Retirement Planner is an Incisive Media publication. Published by Incisive Financial Publishing Limited, Haymarket House, 28-29 Haymarket, London SW1Y 4RX T: 020 7484 9700

(C) 2014 Incisive Media