View more on these topics

Drawdown advice on pots under £100k unviable, advisers say

Advisers question value of drawdown advice for low-value clients in new report

Platforum head of intermediary research Miranda Seath

Investors need at least £100,000 to justify using an adviser for drawdown, IFAs have said in a new survey.

Advisers said this was the average amount that would be needed to add value for retirement planning clients.

17 per cent said that clients would need more than £150,000 to justify drawdown advice, and just 8 per cent said there is no minimum pot size that would make advice on drawdown worthwhile.

The findings are part of a report by consultancy Platforum on advice in decumulation, due to be released later this week.

Platforum head of intermediary research Miranda Seath says: “Advisers have woken up to the fact that it is just not profitable to advise clients in decumulation with under £100,000. While industry commentators may be wringing their hands over a widening advice gap, we think this is sensible. Unless an advice firm is set up to offer ultra-low-cost, automated advice – and many are not – the income generated for the client is negligible and advice fees would eat away at returns.

FCA rules out mandatory drawdown advice

“If advisers looking at retirement solutions are comparing the portfolio to its potential to buy an annuity, then the maths don’t add up for pots under £100,000.”

The report finds that four in five advisers have seen an increase in clients at retirement post pension-freedoms. While part of this is put down to surging defined benefit to defined contribution transfer enquiries, 40 per cent of the advisers surveyed said they did not offer a transfer service.

Higher rate tax changes are a further driver of decumulation advice demand, the report finds.



FCA rules out mandatory drawdown advice

The FCA has raised concerns about savers moving into drawdown without advice, but says that it is unlikely to make seeing an IFA compulsory as those with smaller pension pots could be better served by online tools than full face-to-face advice. The regulator has published interim findings from its retirement outcomes review which found the […]


News and expert analysis straight to your inbox

Sign up


There are 12 comments at the moment, we would love to hear your opinion too.

  1. When did a profit motive ever mean we wouldn’t help a client who needs help? bring on the small pots and the clients who need advice – its the client circumstances that should dictate what advice is necessary – not the size of thier wallets. I’ve give 30 years to this profession (so far) I’m sure I can put something back. Search your conciences IFA’s and put the client first?

  2. Julian Stevens 26th July 2017 at 1:49 pm

    Not long after Income DrawDown first became an option (22 years ago now), Mercers expressed the opinion that it was unlikely to be suitable for anyone whose pension fund was worth less than £150,000 AND that the client should have not less than a similar amount available in cash and/or unfettered investments.

    How times and thinking have changed. Nowadays the primary consideration seems to have become the cost of advising on it relative to the value of the fund.

  3. We’re happy to offer advice on much smaller pots than £100,000, with discretionary managed solutions for sums as low as £10,000 if such Drawdown advice is the ‘right’ route naturally.

  4. Another day, another meaningless survey. There is no definable minimum – speak to an IFA. If important enough to clients, they should do that and shop around. It is as it always should be the circumstances of the client.

  5. Agreed another meaningless survey with the overriding comment by those not advising clients. Miranda you wrong with your assumption.
    please contact me if you want to discuss.
    Answer: it just depends on clients overall circumstances there are a whole range of circumstances and wealth of client that would determine if Flexi Access Drawdown is appropriate for the client it has nothing to do with size of pot.

  6. Thanks for the comments. Of course the picture is more nuanced and we spoke to a number of advisers who were prepared to advise clients going into drawdown with no minimums. I think the profit motive is a red herring – advisers who did specify a minimum pot size were concerned that for many clients with under £100,000, advice fees would eat into returns and felt that other organisations were better placed to serve those clients. So I don’t think it’s a question of advisers going after profit, more that some firms have a very clearly defined group of clients and feel that others are better able to cater to clients with smaller pots perhaps through a cheaper advice offering.The survey is based on responses from 198 advisers in total – 178 for this question. We also interviewed 40 advisers as part of this research through roundtables, workshops, phone interviews so our findings are not just based on a survey. The interviews supported the fact that the approach firms take depends on their business model and their client base.

  7. Adrian Philips 26th July 2017 at 7:21 pm

    Sam Caunt, Paul Jones, spot on.

  8. Small pots annuitized till we decided wen could liberate them. If a small pot is less than £100k, most DC savers have now no default way to create a wage in retirement. There are other ways – with profits is not the solution but it has elements of it, the long-term solution is to create collectives that help people with small pots to supplement their retirement wage with a low or non-guaranteed scheme pension.

  9. It feels that the assumption is that there is an arbitrary review every year.

    For smaller pots, why not review less frequently (and therefore keep the cost fixed for the client whilst the cost of advice falls).

    We ‘flex’ our service and fees to ensure value for money and value added – one size does not fit all.

Leave a comment