Distribution of Retirement Solutions in the At Retirement Market

Transcription

1 IFA trends in the At Retirement market TISA 26 th January 2012 David Burns Executive Director NMG Consulting 69 Financial Planning Through Retirement A research programme on behalf of AIFA sponsored by Prudential Initial study into macro issues in the At Retirement market (2009) Benchmarking study to measure key trends in the provision of advice to the At Retirement consumer (2010 and 2011) 2010 IFA business models, IFA and consumer benchmarking, interviews i with IFA target market consumers 2011 IFA and consumer benchmarking, IFA case studies, consumer interviews with less well off 2010 / 2011 studies undertaken by NMG 70 1

2 Contents The At Retirement consumer IFA trends in servicing the At Retirement consumer Key themes from the research The At Retirement opportunity 71 The importance of At Retirement 6 in 10 IFA Clients are At Retirement one third > 150k in investable assets Client Profile by life stage Client Profile by wealth 72 2

3 The need for advice At Retirement At Retirement is becoming more complex as working becomes the third pillar of retirement income alongside state benefits and pension Proportion of clients with income gap Action to deal with pension gap Work part time to supplement their income 39% Retire fully and accept a reduced standard of living Delay retirement & work longer full time to increase assets 19% 23% Other 5% Don t know / it varies 13% 0% 10% 20% 30% 40% 50% 73 Consumer key points Over 25k investable assets Under 25k investable assets Worry about their future health Much more concerned about while filling time in retirement managing financially and remains to be less of a concern maintaining health Limited understanding and awareness of retirement issues Few want to embark on a full, comprehensive financial planning process More personal time to do things they enjoy is by far the main reason for retiring Broad range of advisers used (IFAs, banks, work place) Much less confident about having sufficient income in retirement Notable proportion do not believe they need any retirement advice Working beyond retirement age is more likely to supplement income and keep themselves occupied 74 3

4 Availability of advice Independent advice is increasingly becoming limited to those with more substantial assets Pension fund 100k+. Home owner. Investment property / 100k+ in other S&I Pension fund assets of up to 100k. Home owner. 30k 50k in other S&I Pension fund assets of < 50k. Small / negligible amount of savings 75 Consumers with 25k pension fund In the main advisers are willing to assist all consumers but the trend is towards provider less advice 76 4

5 Retirement planning timescales For half of consumers income planning only starts within 2 years of the intended retirement date How far ahead considered Immediate retirement 6% When income planning begins 2 years into retirement 6% 5 years 10 years Later into retirement 14% 19% 22% Difficult to say 33% 0% 20% 40% 77 Important considerations at retirement The At Retirement process is quite narrowly focused around current assets Very important at retirement Become more important in retirement 78 5

6 Use of tools Tools used At Retirement largely mirror those used during accumulation Risk profiling tools Asset allocation tools Fund selection tools Life time cash flow 79 Products used at retirement Conventional annuity (including enhanced) and drawdown dominate Assets in pension average proportion going to each product Assets outside pension average proportion going to each product 80 6

7 Income at retirement Around 6 in 10 will take an annuity but over half of these will have other sources of investment income Proportion of clients that will primarily be relying on product for retirement income 81 Past and future products Almost half of advisers expect to increase their use of annuities with an investment content Net change over last 3 years Net change expected over next 3 years 82 7

8 Frequency of reviewing needs by client profile 7 in 10 of those with < 50k will have a purely transactional relationship with an IFA which may not reflect the requirements of their changing circumstances Pension fund assets of < 50k. Small / negligible amount of savings Pension fund assets of up to 100k. Home owner. 30k 50k in other S&I Pension fund nd 100k+ 100k+. Home owner. Investment property / 100k+ in other S&I 83 Income drawdown reviews 7 in 10 think it likely that clients will see a fall in income from drawdown at next review More IFAs have moved drawdown clients into an annuity in the past 3 years (27%) More expect to have to move drawdown clients into an annuity in the next year (41%) 84 8

9 Current At Retirement approach Most IFAs do not treat At Retirement as a distinct market and opportunity Short term horizon Narrow focus / Reluctance to discuss wider issues Little distinction between accumulation and decumulation investment process Reviews based around performance not achieving and maintaining income objectives At Retirement not articulated as something distinctly different 85 Future for At Retirement Specific propositions and entire businesses will emerge with a focus on retirement income Key trends supporting IFA At Retirement tproposition focus on At Retirement: Financial planning focused (lite / Client drivers heavy) Age profile (55+) Elements of Life Planning Distribution of wealth techniques No bigger issue Wider scope state provision, Business drivers equity release, health Retirement focused tools IFAs becoming more commercial Shift to recurring income models Move away from fund picking as a proxy of value Broader product mix Regular engagement and updating focused on staying on track 86 9

10 2012 programme IFA and consumer benchmarking The role of property The later years and The views expressed here are those of NMG and not necessarily AIFA or Prudential 87 10