Everything has changed in terms of pension options in the two years since the pension freedoms came into force. But in terms of dealing with clients, not much has changed at all. Most new clients come with the same amount of personal baggage as they did back then.
In advice, I try to reconcile theory with practice and practise what I preach. For instance, I often talk about retirement being a journey, not an event, and how it is an iterative process. I also talk about there being a number of behavioural factors and technical issues to take into account at any point in that journey.
The concept of the retirement journey was brought into focus during a recent discussion with a long-time client now in her 80s. I gave her good advice 10 years ago when she purchased her annuities because her income has been higher than if she had left her savings in the bank.
I remember telling her back then to think of her house like the Bank of England: lender of last resort. But now is the time to consider equity release. She has journeyed from mid-retirement where a comfortable income was the priority, to later retirement where she now needs money to pay for her care needs.
“Most new clients come with the same amount of personal baggage as they did back then.”
Nudging towards better behaviours
Meanwhile, on facilitating an iterative process, I am currently involved in a perfect example. I am advising the owner of a Chinese restaurant via his son who is translating. We started with “my father would like all of his pension in cash”, went through explaining the tax consequences of that and have now arrived at a form of drawdown.
This involves a series of questions: how much would he get from an annuity? How much would he need if he wanted his income to last for the rest of his life? And so on.
When I finally deliver my formal advice, I will have used many of my nudge techniques, my ability to explain things simply and my technical expertise to deliver good advice to someone who has a significant pension pot and would otherwise probably not have sought it.
And finally, to the technical side. The quality of drawdown advice has increased over the years, with more attention being given to sustainable income levels, managing sequence of returns risks and identifying the most appropriate investment strategies.
In conclusion, then, the pension options may have changed and the amount of technical analysis increased, but many behavioural issues remain the same.
Billy Burrows is director at Retirement IQ and adviser at Better Retirement