Assessing client attitude to risk, though, is fundamental to our work, yet I commonly see in my travels advisers approaching the question in the same way for a client’s investments as their retirement income, as they might as well their recreational activities.
I believe so much that this process flaw exists that we created a new set of descriptions that you could use.
Having a better idea about what is coming down the tracks helps you understand the risk that you may be carrying
The point of this work, which is available for free on our website, is to create the debate and challenge our thinking.
I never profess to be the expert, I just have a particular interest in pensions, but surely when we are assessing a client’s ATR, we should be asking different quest- ions for retirement income than we do for their lump- sum investment.
The problem in turn as the professional adviser knows well is that as time travels, the client will change. Indeed. I suspect we all do. So the client with the appetite to catch a few bull runs in the noughties, might now be rubbing his sores and saying “not that again, thank you”.
The 12 critical factors for retirement advice that we published nearly two years ago starts with the environmental factors: economy, inflation and your view of the future changes to legislation, taxation and regulation.
Having a better idea about what is coming down the tracks helps you under- stand the risk that you may be carrying as an individual or indeed, as a business. I believe in advisers because we can provide an educated view of the future.
So what’s happening? The stockmarket is up but we still do not know for how long and inflation is on its way. The Government might change its colour soon, maybe even to a coat of many colours, and the rules for tax and allowances may be impacted.
We know we have clients paying an effective rate of 30 per cent tax today, though, and we may have others paying a 60 per cent rate after April. In turn, we also know that there is a train on the line called Solvency II which could knock down UK annuity rates in years to come, which is something I am sure we have all allowed for in our risk warnings at drawdown reviews.
The moral of my tale is this – mind your attitude – it could bite you in the bum.