Like much in life, research is really about the questions you ask. When asked by the Public Library of Science to distinguish from viewing faces whether the person was heterosexual and homosexual, volunteers were able to do so in just 50 milliseconds (a third of the time it takes to blink). Accuracy remained greater than pure chance even when the photos were upside down. All this really teaches us is there are no right answers to wrong questions.
Fortunately results were published before our work with advisers on the at-retirement market kicked off. There are some clear messages for providers, platforms and advisers in the at-retirement market, particularly on risk and the clarity of communication.
The negative effects of quantitative easing, upcoming Europe-wide regulation under Solvency II and the introduction of unisex annuity rates in December will all constrain future annuity rate rises. With nearly 60 per cent of advisers’ client banks aged over 55 and with longevity increasing the implications for advisers are significant.
The response to lower annuity rates has been to develop new alternatives to annuities. This innovation has good and bad elements, according to advisers we’ve spoken to. Advisers certainly tell us that clients want greater flexibility, or rather a widened approach to their portfolio planning, and over two- thirds expect to use more blended solutions.
The downside is there is an increasing level of confusion on exactly how these alternatives work, what their benefits are and risk associated with them.
With volatility and uncertainty our new normal, combined with the increasing fluidity of consumer lives (and objectives), risk is becoming far more subjective. In this respect, financial planning is (or should be) far less linear – market risk, health risk and longevity risk are areas advisers believe are critical in their retirement strategy considerations, yet they also believe they are currently underserved (by tools and technology) in this area.
Looking beyond single solutions is becoming increasingly necessary to meet client’s retirement expectations while offsetting unacceptable levels of risk. But there is a clear message to providers and platforms that advisers are sceptical about new alternatives and will remain so until and unless more is done to clearly demonstrate what they are for, who they are for and how they can help.
Phil Wickenden is founder of So Here’s The Plan
Quotes taken from interviews with QCF Level 4 qualified financial advisers from fee-charging businesses.