Financial advice firms are “complacent” in their approach to retirement income, according to one discretionary fund manager.
Research from Copia Capital in conjunction with the Lang Cat found just one in five firms planned to make changes to their investment approach in light of the Financial Conduct Authority’s review into retirement income advice.
Copia managing director, Robert Vaudry, said: “Given the findings of the thematic review, it now seems that some firms appear complacent in their decumulation approach.
“With the FCA’s focus on the importance of considering the sustainability of income and the specific risks faced in retirement to avoid clients running out of money too soon, we expect far more firms will now be reviewing their processes to make sure they meet, and are evidencing, the regulatory requirements.”
The report, Rethinking Retirement: Changing Gear, found currently only 17 per cent of firms use a dedicated retirement proposition separate from their centralised investment proposition.
While 80 per cent use the same model portfolios for clients both accumulating and decumulating.
Just 20 per cent of respondents said they planned to make changes to their approach in the next year.
Vaudry added: “Deciding how and when to start the transition from accumulating wealth into decumulation is one of the most challenging financial decisions an individual will face in their lifetime.
“With the introduction of pension freedoms, the decline of defined benefit schemes and the rise of defined contribution schemes and auto-enrolment, these choices have become more complex.
“Advisers have a crucial role in helping clients decide not just how they finance their retirement, but also the level of income to draw and an appropriate investment strategy for funds that remain invested.”
He added DFMs also have an important role to play in designing, building and managing solutions.
The survey of 160 advisers also found a growing interest in guaranteed and smoothed investment products with 57 per cent of respondents using these products for at least some of their at-retirement clients.
Of these, 30 per cent said they had increased their usage in the past two years and a quarter said they were reviewing their approach due to rising interest rates and gilts.
tara.o'connor@ft.com
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