VALUE TO YOUR FIRM

Flexible access drawdown has rapidly become the new normal for people retiring and most people will require advice to manage their assets throughout retirement.

Regular reviews can provide reassurance for clients and provide the opportunity to make adjustments where necessary.

Regular reviews also generate income for the firm. 

Falling assets

Over the course of a retirement, assets are likely to fall in value as income is withdrawn, if the amount of income outstrips the growth over a long period.

This means if a firm’s fees are expressed as a percentage of the fund they will fall too.

There may be a number of ways to manage this process.  The basis of a firm’s remuneration during retirement could change from a percentage of the fund to a fixed fee, for example. 

Another option could be to annuitise some of the assets. This might seem counter-intuitive, but there are sound reasons to do this from your perspective and the client's. The client may benefit in any number of ways:

  • Essential and important expenses should be covered with a guaranteed income. 

  • Displacing bonds in a portfolio with annuities can improve the sustainability of income. 

  • There comes a point where the mortality credit from an annuity makes it very difficult for drawdown to match the returns from an annuity without taking significant risk. 

From a firm’s perspective, managing 100% of assets in a flexi access drawdown is time consuming.

Introducing a degree of annuitisation can make it easier and therefore less time consuming, which can help to maintain the firm’s profitability if the income to the firm is reducing.