Advisers are currently not well equipped or trained to offer retirement income advice, according to Mark Northway, investment manager at Sparrows Capital Limited.
Speaking to FT Adviser, Northway discussed how advisers would need to have a refresher on how approaches to accumulation and decumulation differ.
He said: “There is a wide dispersion of advisers. There are those that are extremely on the ball, aware of the risks their clients are taking, and of the specific elements that need to be fed into a plan, and are offering excellent advice.
“Then there are those giving very poor advice. And there is a fair chunk of the industry that has not accepted historically that you need to do something different in decumulation than you need to do in accumulation.”
Northway understood that in some cases an adviser would not need to provide a different approach to a client in decumulation but stressed if that was the case then the adviser needed to have a good reason why in order to justify this.
“What is crystal clear is that a one size fits all approach from an adviser firm is not going to work, it needs to be tailored. Both training and product innovation is needed in the retirement income space,” he added.
In terms of who should be offering that training, Northway said the onus was on the industry as a whole.
He said: “What consumer duty has done is it has thrown obligation right throughout the value chain and the same thing should happen in this space.
"Anybody who is involved in the provision of products needs to be thinking about how these products are applied. And part of that is giving advisers the tools they need to make decisions around them, and not just focus on pure marketing output.”
Northway said this needed to be backed up by industry bodies.
He suggested for industry bodies to review the different qualifications that are needed for advisers at different stages of a client’s life.
“Retirement income advice is a more complicated space and even just running somebody through crystallisation brings up a load of issues that an adviser in his first 20 years of advising a client wouldn’t have had to think about,” he added.
Risk of unintended outcomes
Northway believed if advisers did not become well equipped to offer retirement income advice then this risked creating unintended outcomes for clients.
He said: “We're dealing with products that address the future and they are available on a spectrum with a guaranteed outcome at one end, and a very unpredictable set of outcomes at the other end of the scale. And there are benefits to the positioning on that spectrum.
