I read recently that a study by Just Retirement had shown one in three IFAs has written fewer than ten annuity cases in the past year.
I find this quite disheartening when I think the annuity market is predicted to be worth £20bn by 2012. IFAs seem to be missing their slice of the pie.
These are challenging times for those approaching retirement and seeking an ongoing income stream. With interest, annuity rates and standard investment options all looking lacklustre in the low base rate climate, the traditional life and pensions models are certainly being stretched to satisfy the needs of today's generation.
The retirement solutions needed today may well be far more complex, but we should not be shying away from this. Now is the time for IFAs to stand up and be counted as a vital component in helping this client category assess all the options available.
The over-50 population now owns a massive 80% of the UK's wealth and far from wanting to 'retire'; this new 'third-age' category are ditching their slippers in favour of a much more positive and aspirational outlook on the next phase of their active life.
Longevity is one of the most important considerations when looking at the options available for providing retirement income. The current life expectancy for a male age 65 is 21 years and for a female 23 years, although I've read that this is rising by a staggering five hours every day! This change in life expectancy will have an inevitable impact on the ability of providers to maintain annuity rates even at their current levels.
Clients heading for retirement now will demand much more control over retirement funds and need much broader advice on the opportunities open to them to maximise growth potential in order to be in the best position to leave funds behind to their loved ones.
So what options can we offer our spritely clients now approaching retirement? The conventional fixed annuity was the only option for many years, then came income drawdown (now unsecured pension), and most recently we saw the introduction of the new "Third Way" and "Variable Annuity" type retirement solutions. All bring an array of different product designs, principles and complexity to the retirement market.
The development of a wider choice of flexible products is good for the industry and the retirement market generally, but clearly some still fall short of offering the amount of freedom needed.
This means IFAs need to have a more specialist knowledge of a wider and more diversified product range than ever before, as a tailored combination of different products should be developed to meet clients' needs.
This is a prime opportunity for us to show our worth in an increasingly difficult environment, and see our clients off into the sunset of happy retirement. At 2plan we provide our advisers with a chartered financial planning support service to help out with any particularly large or complex cases - so there really should be no shying away from this lucrative market.
More than anything, innovation around advice is critical. It's obviously vital to recognise the wider choice of products now available have an important role to play in good retirement planning. Successful holistic advice is based on understanding - and of course having the knowledge and ability to design a retirement solution using not one but a combination of the products available. Thinking outside the box is a must!
Chris Smallwood is CEO of 2plan Wealth ManagementIFAonline
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