Coronavirus highlights the value of retirement advice

For intermediaries only

For the second year running we’ve sponsored Next Wealth’s comprehensive research report ‘Managing Lifetime Wealth: retirement planning in the UK’.

The report offers valuable insight for advisers, and those within the retirement advice industry, to help understand the latest views on some of the biggest industry trends. The research was conducted with over 200 financial advisers and supplemented with in-depth interviews.

The single biggest financial impact of recent times has of course been the global coronavirus, which not only changed the way we work and live, but also affected financial advice business growth, and client behaviour.

The report explores the impact of coronavirus on retirement advice, and the growing importance of retirement advice to adviser businesses.

Some of the key findings:

  • Retirement advice is of significant importance to adviser businesses, accounting for an average 58% of adviser assets under management.
  • 4 in 10 (40%) advisers say demand has increased over the last, with greater numbers of clients considering their health.
  • The majority (90%) agree portfolios used for retirement have performed in line with expectations and only a few (6%) have fundamentally changed their investment strategies for clients in retirement.
  • Nearly half (47%) said clients viewed the market fall in early 2020 as a buying opportunity.

Driving up demand for advice

The ageing population, the introduction of pension freedoms and the increasing complexity
of managing retirement income continues to drive up demand for financial advice. Today, the research shows that on average, 58% of advised assets are for clients receiving retirement advice. This is expected to rise to 63% in the next three years.

This long-term trend has been accelerated by the coronavirus pandemic, which advisers believe has increased demand (40% vs 13% who disagree).

Over half (55%) of advisers agree it’s caused clients to think more about their health and longevity, while others pointed out that many clients had re-evaluated their priorities as a result or started retirement earlier due to a loss of work.

Market volatility

The research highlights that for the first time in a number of years market volatility and the possibility of sequencing risk have become real, rather than hypothetical, risks in clients’ minds. Reassuringly, the vast majority (90%) of advisers say that the portfolios used for retirement have performed as expected, suggesting that risk management in retirement was generally effective.

Just 6% of advisers have fundamentally changed their investment strategy for clients in retirement as a result of the pandemic and subsequent market shifts. Although nearly half (47%) of advisers say that their clients viewed the stock market fall in 2020, and the volatility that followed, as a buying opportunity and invested new cash.

The use of cash buffers also enabled some clients to leave investments untouched and take income from cash when the market dipped.

New client acquisition

The biggest business impact of the pandemic reported by advisers has been on new client acquisition. Nearly six in ten (56%) said that acquiring new clients under the current conditions is significantly harder. This was higher among advisers servicing clients with smaller portfolios.

However, lockdown has presented new opportunities as 43% of advisers believe their businesses were more efficient in a virtual world, versus 21% who disagree with this.

There was also evidence to suggest that clients had become increasingly confident in moving from face-to-face meetings to online meetings. Might this become the new normal?

Retirement advice going forwards

Retirement advice has become an increasingly important part of adviser business in recent years and the financial impact of the coronavirus has further highlighted the value of advice in this area.

Alongside market volatility, some retirees will have experienced significant changes to their personal circumstances over the last year, causing a re-evaluation of long-term goals or steering them to think about their health more. For others, the market falls at the beginning of lockdown may have presented a buying opportunity while equity prices were depressed.

All of these situations, although complex and often with lasting consequences, require you to help your clients navigate through the uncertainty both now, and into the future.

Read the full report to find out more.


Source for all figures quoted:

Aegon research with Next Wealth — Managing Lifetime Wealth: retirement planning in the UK Report. The research was conducted with 212 financial advisers between 3 and 11 December 2020.