IFAs have insufficient specific offerings for the retirement market, it is claimed

News - Living

Written by Ray Clancy

Monday, 29 November 2010 10:18

Some 30% of Independent Financial Advisers’ clients are either planning to retire in the next two years or are in partial retirement but there are not sufficient products for them, according to the profession’s main association.

Few IFA firms have a specific offering for the at retirement market with current service propositions largely mirroring those for the asset accumulation stage, says the Association of Independent Financial Advisers (AIFA).

Some 70% of advisers report an increase in the use of enhanced/impaired annuities and 39% of advisers predict growth in variable annuities over the next three years.

But a study from AIFA and Prudential UK suggests more needs to be done for consumers at retirement and to identify ways in which this market can be further developed.

Two million people will reach retirement age between 2010 and 2012 with a 22% increase in those reaching the milestone between 2011 and 2012 alone as the baby boomer generation hits retirement and this presents a huge challenge and opportunity for the advice profession, according to Andrew Strange, director of policy at AIFA.

‘At retirement is a distinct market with unique characteristics. Consumer needs are different and often more complex than at other stages of life. The decisions that consumers make at this time are vital and have long term implications for their future wellbeing. Four out of ten clients at retirement are new to adviser firms, which presents a significant opportunity to attract new clients. Firms should prepare now for arguably one of the biggest opportunities in financial advice,’ he explained.

Barry O’Dwyer, deputy chief executive at Prudential UK, said that the importance of good advice and the role that advisers play in helping people to secure a comfortable retirement is pretty hard to overstate.

‘We remain supportive of firms who are showing increasing transparency on fees and therefore making it easier for consumers to understand the value of financial advice,’ he said.

The report also identifies a shift in the annuities market with a recent increase in enhanced annuities and a predicted rise in the use of variable annuity products in the next three years. But more than half, 51%, of consumers are not aware of the range of annuity options available at retirement.

The report highlights some opportunities for adviser firms to enhance their at retirement proposition including beginning discussions around future income requirements and funding at an earlier stage, introducing a ‘count down’ to retirement approach for clients and broadening the discussion to include areas that are not always covered, such as state benefits.
It also recommends signposting potential future requirements, including those that are less palatable for the client to discuss in the earlier stages of retirement, such as equity release and long term care.

‘Retirement will, for most, be a 20 year journey, not a single event, and many consumers will need access to advice throughout. IFAs are well placed to provide this. There is understandably some level of discomfort in discussing difficult issues such as health and long term care issues. But this is key to developing a long term relationship through retirement rather than one that begins and ends at the purchase of an annuity,’ added Strange.