IFAs target small pots for drawdown advice

Financial advice-planning-advice-cashflow-analysisThe number of IFAs who will consider drawdown for clients with pots of under £50,000 continues to grow, according to Cicero Group’s annual adviser study.

This year the research finds over three-quarters or 78 per cent of advisers would consider drawdown for those with pots under £50,000, higher than the 69 per cent in 2015.

Similarly IFAs are more likely to be using drawdown solutions than any of other solutions in the market and 72 per cent of them say there is a need for a more centralised retirement income planning process.

This is due to most advisers usually managing money for longer due to both greater numbers selecting drawdown and continued management of money post-death, alongside the increasing complexities of decumulation.

Yet, four years on from the introduction of pensions freedoms 39 per cent of advisers accept they still need to implement changes to their processes.

The use of annuities is generally expected to increase after the initial drop in the use of them when the pension freedoms first took hold.

That is even the case with conventional annuities, despite advisers generally perceiving these to be of poor value.

Cicero’s report says: “We are now seeing the realisation that annuities will continue to play a part (even an increasing part) in the average income strategy pay out. This is not to say that everything is rosy in the annuities space. Clearly it is not.

“Rates are still particularly low and advisers can view them as poor value but necessary in most cases.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. I very much doubt that IFAs are targeting small drawdown pots it’s probably more that so many retirees are now seeking help where previously they self purchased an annuity from the provider holding their pension plan.

  2. Many reasons for this.

    We are finding that more clients want holistic at-retirement advice so we might recommend that a client runs down a small pot over a few years before moving to a larger fund or drawing a DB benefit.

    Also a lot of newer PPPs are drawdown ready so it’s much easier to justify drawdown of an existing fund rather than having to recommend a pension switch first.

  3. There is so much cant and hypocrisy surrounding this topic. That advisers will continue to benefit from an ongoing income stream instead of just a one off annuity charge has, presumably, no bearing on the matter.

  4. Some advisers’ income streams aren’t related to the products recommended but to the ongoing advice provided to the clients, regardless of where they are invested and where their income is coming from.

  5. Not a huge amount of ongoing advice needed once a client has purchased an annuity.

  6. I guess that was the case in the old days when you could take a stack of commission up-front and then not worry about whether a client’s circumstances change or not.

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