Too many Planners relying on averages warns DFM

Too many Financial Planners are relying on averages for their retirement income planning process, according to DFM Hymans Robertson Investment Services. Relying on averages rather than using outcomes-based analysis could lead advisers struggling to meet the FCA’s new requirements in its thematic review of retirement income advice, according to the report. Reliance on averages when making assumptions could lead to incorrect prioritisation and clients facing significant shortfalls in retirement, according to the firm. William Marshall, CIO of Hymans Robertson Investment Services, said: “The FCA points out that more individuals are taking income from pensions that remain invested. For many IFAs this makes planning for a sustainable income that lasts throughout retirement even more complex. “Reliable plans are dependent on strong outcomes-based analysis which, in turn, requires a foundation of robust data. Without this, advisers’ clients could end up facing a shortfall in retirement income. Advisers will be able to make significant improvements in planning for sustainable incomes if their analysis accounts for variables that are at client-level. "These include elements such as a client’s specific investment portfolio or client-level longevity information, that can be made even more detailed by splitting the data to postcode level. "By basing plans on such robust data, advisers will also have what they need to communicate effectively about the advice they have provided. “For advisers who have capacity they can also implement portfolio stress and scenario testing. Both allow deep scrutiny of risk levels and a way for advisers to evidence that they avoid causing foreseeable harm.” The FCA’s retirement income advice review will assess the quality of client outcomes. It will look at how advisers should determine and communicate sustainable income levels to their clients, including the potential risks. It will also assess how advisers calculate and communicate longevity-related risks.

Too many Planners relying on averages warns DFM

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