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As we begin this new tax year, it is crucial to start with the right questions. Reflecting on the past three months, was it business as usual with your annual reviews? Or did last-minute ISA top-ups from the usual suspects consume your time? If the latter resonates, you might face a significant backlog. So, how do you plan on catching up?

Financial advisers are required by the regulator to provide clients with full suitability reviews annually, ensuring compliance with regulations (FCA COBs 9A 3.6-9).

If you’re finding yourself falling behind, catching up without the right resources can be daunting. This week’s post aims to help you kick off on the right foot by establishing the correct processes. Allocate time amidst the post-tax year-end lull to contemplate your client’s annual review process.

Proactive Scheduling:Ever wondered about the ideal timing for contacting clients to schedule review bookings? We’ve honed our approach and found that reaching out one month in advance works best. This strategic timeframe allows for ample preparation on both ends. Ensuring both you and your client are primed for a productive discussion that drives progress and success.

Preparation: When preparing for client meetings, we view it as a two-part task. Part one begins with our initial contact to arrange the review meeting. During this phase, we provide the most recent compliance documents and request any additional information necessary for the meeting or file.

Once the meeting is scheduled, we move on to part two of our preparation process. This involves assembling our client meeting packs, a task that demands meticulous attention to detail. Within these packs, we include comprehensive summaries of portfolio performance, updated financial goals, and personalised recommendations. All of this information needs to be pulled together just before the meeting to ensure that clients receive the most up-to-date insights and advice tailored to their needs.

By starting this preparation process early, each review is conducted with thoroughness and precision, ultimately delivering maximum value to your clients.

Efficient Tracking: To ensure seamless operations, a robust tracking system is indispensable. At We Complement, we’ve designed a sophisticated solution that goes beyond keeping tabs on upcoming reviews. Our system meticulously highlights any overdue appointments, providing clarity on each client’s review journey and the subsequent steps required. This proactive approach empowers you and your team to maintain full control over your workload, ensuring that every client receives the attention they deserve without the risk of falling through the cracks.

Timely Documentation: It is worthwhile for advisers to set aside a weekly ‘admin day’, giving themselves time to follow-up meetings promptly with the correct documentation or handing over to a paraplanner. We’ve heard of clients waiting months for the review letter. By prioritising documentation and streamlining the delivery process, you can enhance client satisfaction and build trust in your services.

Back-Office Systems: We advise our partner firms to leverage their back-office systems to track due reviews, and sign off upon delivery. If your system needs enhancements to alert you of impending reviews, We Complementcan implement these workflows seamlessly.

Do you have a process in place that monitors your review process? It’s crucial to extract the data, ensuring a high-level view of your company’s performance. Remember, failure to deliver reviews correctly could lead to complaints and fee reimbursements.

In small or medium-sized businesses, we understand you can be pulled in every direction. That’s where we come in. We work with firms to establish review processes, manage the flow of reviews, book appointments, and prepare review packs. Our paraplanners offer technical support to you and your advisers, even if it’s just to discuss a case.

If internal resources are lacking, let us be the extension of your team that you need. With We Complement, you can ensure your clients receive the attention they deserve while optimising your operational efficiency.

One of the common misconceptions our paraplanners see is that attitude to risk trumps capacity for loss, when it’s more likely to be the other way around. While a client may have the appetite for risk, they may not have the financial ability to absorb any losses that result from a higher-risk investment.

As part of the recent thematic review of retirement income advice, the FCA wrote-

“ATR  is a subjective measurement of an individual’s willingness to accept risk while CFL relates to their ability to absorb losses. ATR and CFL are both key elements of risk profiling. When moving from accumulation to decumulation it is likely that the ATR and CFL for many customers will change so needs to be reassessed”

The FCA has reported that some firms are not assessing CFL for customers. Neglecting Capacity for Loss (CFL) in the decumulation phase can result in firms inaccurately pinpointing suitable income or investment-based solutions for their clients. This oversight may prompt customers to undertake excessive risk, potentially subjecting them to income reductions that exceed their ability to endure.

That’s why We Complement feels assessing capacity for loss is a vital part of many suitability reports and a concept that all paraplanners are familiar with. Read on to discover five important points you need to consider when assessing a client’s capacity for loss.

1. The Financial Conduct Authority (FCA) requires the capacity of loss to be considered

In March 2021, the FCA published its Finalised Guidance on Assessing Suitability. In it, the authority defined capacity for loss as the following:

”The customer’s ability to absorb falls in the value of their investment. If any loss of capital would have a materially detrimental effect on their standard of living, this should be taken into account in assessing the risk that they are able to take.”

The statement follows the FCA’s 2017 Guidance Consultation document, which requires Advisers to consider a client’s attitude to risk as part of assessing suitability. It goes on to add that:

“The client’s capacity for loss (the client’s ability to absorb falls in the value of their investment) should also be taken into account.”

2. Several factors influence your client’s capacity for loss

When considering your client’s capacity for loss, there are many aspects of their financial situation that need to be considered carefully. These include:

• Income needs
• Present and future income sources
• Other assets
• Expected inheritances
• Time horizon before the investment will be drawn upon.

Once considered it’s vital to ensure that you make detailed notes in the fact-find.

3. There are two types of losses

Broadly speaking there are two types of loss advisers need to consider: permanent and temporary. The prospect of a client suffering a loss that they have no chance of recovering is different to a loss that they can expect to recover over time.

It’s important to assess this and understand whether the client could withstand one of these types of loss but not the other, both, or neither.

4. Understand the difference between the client’s willingness to accept risk (attitude to risk) and their ability to withstand it (capacity for loss).

While capacity for loss and attitude to risk are distinct from one another and should be assessed separately, it’s important to also consider them together. This will provide a balanced view of your client’s situation.

For example, if a client has a low capacity for loss but says they’re willing to take a high degree of risk, it’s likely that their capacity for loss will be the limiter on the solutions you recommend.

5. Cashflow modelling is a good way to determine capacity for loss

There is no single correct way to assess capacity for loss, and different advisers prefer different methods. Cashflow modelling is typically the most precise way of assessing capacity for loss, as you can calculate a loss in percentage terms and see how this interacts with your client’s cash flow forecast.

Capacity for loss questionnaires are also popular, or you could look at the client’s income requirements and how this could be affected by any loss made.

Get in touch

If you would like to discuss capacity for loss in more detail, or how we can ensure that your suitability reports stand up to scrutiny, please contact us online or call 01472 728 030.

I have always believed a firm should have its own bespoke CRP. I also believe that, if anyone is ever going to have a financial planner engaged, it should be in retirement. However, there are several elements’ adviser’s must know when commissioning or preparing such propositions.

Ongoing suitability

Firstly, ongoing suitability; it is important here for advisers to remember that pension drawdown is not a product, it is a pathway. It may be something to consider once a client is in retirement and looking at possible decumulation, but the bigger picture needs to be considered.

As we all live longer, retirement comprises several stages, from the first flush of activity filled with holidays and grandchildren to the latter years, which may feature ill health and the need for fully supported accommodation.

All clients are unique but do share common fears, concerns, and desires for superior quality of life at all ages but especially in retirement. People have diverse ways of achieving those desires, so, rather than shoehorning every client into flexible drawdown solutions, advisers must always focus on what is right for the client.

Therefore, regular reviews are vital because, whilst it is important to have a plan, a cash flow forecast or similar, at the start, once that plan has been drafted, its value and accuracy will erode. Therefore, an adviser’s role and advice becomes critical. Ensuring that any plan remains suitable during the clients’ differing retirement stages, rather than concentrating on individual products.

An effective CRP is not about how money is invested; it must consider each client’s behavioural biases, health issues, and legacy plans. It involves difficult discussions, handled sensitively – after all, none of us want to leave this mortal coil but we are all going to, and an adviser must be that critical friend making sure the pathway is suitable.

Because assessing a client’s attitude to risk and capacity for loss is not just terminology to tick off; it should be part of an overall ongoing discussion document that paints a unique picture of each individual’s life.

Sustainable withdrawal rates

As highlighted in the excellent book ‘Beyond The 4 per cent Rule: The science of retirement portfolios that last a lifetime’ by Abraham Okusanya, we need to think differently about income drawdown sustainability and consider different income solutions for different client’s income needs. This change in mindset will not be easy and the requirement for a new solution to a new problem has not been universally embraced by the advisory community.

In my 30+ years in the financial planning profession, we have seen the many recessions and financial crises, such as the tech meltdown of 2000 to 2003, the great recession of 2008, and a pandemic. No one saw any of these coming, which highlights the importance of having investment portfolios built in such a way that clients have a plan to get through 40 years of retirement.

Any adviser who writes up a plan and sends retirement clients on their way is not doing the job properly, in my view. They need to be tapping the tiller at least every six months to make sure that the clients’ withdrawals are still suitable for their retirement stage and continue to be sustainable.

Everything should start with the individual client and, as much as possible, their personal health and longevity position, not the mass market and lazy use of ONS averages. Every client will have their own requirement for income, their views on what core (essential) income is, their own mix of pension savings, debts, and liabilities, their own needs, and circumstances, and their own views on what investment risks are acceptable. It will be different for everyone and so everyone will have their own view of Safe Withdrawal Rates (SWR).

One way to define and evidence the SWR applicable to each individual is to approach it from two perspectives.

One. Ask the client to define their income needs, and split between essential expenditure and discretionary spending.

Two. Understand and establish the ‘controls’ for each income stream. The moving parts can explicitly define how the SWR is achieved.

Drawing up a CRP

An effective CRP is a starting point as a template for each client and ensures, while they may all end up in a different place, they have all been through the same process. It should be a document that can apply to a retired doctor, or a retired dustman; both will go through the same discussions and end up will be in the right place for them.

Below is a checklist of the areas to consider when developing a CRP or retirement planning process:

• PROD: Is it documented. Is it embedded in your DDQ?
• Evidencing value for money – FCA consultation paper CP20/9
• Cashflow Tool: Do you use one? What are the assumptions within it?
• Retirement Fact Find: Updated date. Does it include soft facts?
• Annuity Rates: Checked rates. Update frequency?
• Safe Withdrawal Rate: Rate used. Consistency. Evidence?
• Cash Buffer: Yes or No? How held (on/off platform). How much?
• Risk Profiling: ATR. C4L. Need for Return. Risk tool Due Diligence?
• Inflation Assumptions: Rate used. Evidence?
• Taxation and allowances considerations: Income Tax and Lifetime Allowance, etc
• Sequence Risk: Understanding and explaining it. Mitigation Strategy?
• Investment Philosophy: Is it documented. Evidence?
• Investment Service: Pots or Single? Small Pots. Evidence/DDQ?
• Adviser Service Offer: PROD segments. Drawdown service?
• Adviser Fees: £s or %. Small pots. Long Term. Documentation?
• Platform for Drawdown: Checklist (PROD and Service). DDQ?
• Client Understanding: Process. Simplicity. Documentation?
• Vulnerable Clients: Statement. Process. Documentation?
• Conflicts: Issues. Management strategy?
• Showing Your Value: Examples. Communication?
• And last, but not least, is it aligned with your consumer duty requirements?

We Complement works with firms to build the CRPs, which should reflect a firm’s ethos, their desire to help, what is right for their clients and their investment beliefs, creating a document they can use as a guide each time.

A successful CRP is a living document, constantly updated to reflect a client’s changing desires and circumstances. Our aim is to support advisers in creating such documents while maintaining that regulatory consistency to keep everything in check and make sure the client is happy – which should be everyone’s goal.

If you would like to learn more about CRP, read the book that our founder Tony has written, which is full of useful information and insights.

We would love to help you to either revisit or implement your CRPs, contact us online or by calling 01472 728 030

Running a financial practice is a rewarding journey filled with excitement and challenges. However, amidst the exhilaration, it’s not uncommon to feel overwhelmed, stressed, and stuck at times. The endless to-do lists, tight deadlines, and constant changes in the industry can take a toll on your well-being and your business’s success.

If you find yourself in this situation, know that you’re not alone. Many financial practitioners face similar struggles, but there are proactive steps you can take to navigate through these challenges effectively.

1. Write It Down: Feeling overwhelmed often stems from mental clutter. Take a moment to declutter your mind by jotting down all your tasks and responsibilities on paper. This simple act can help alleviate the burden on your brain and provide clarity on what needs to be done. Don’t worry about organising or evaluating tasks at this stage; just get them out of your head and onto the page.
2. Focus on the Process: While it’s essential to have clear goals for your practice, it’s equally important to focus on the process of achieving them. Instead of fixating solely on the end result, break down your objectives into smaller, manageable tasks. By focusing on each step of the journey, you can avoid feeling overwhelmed by the magnitude of your goals and make steady progress towards achieving them.
3. Schedule and Prioritise: Break down large projects into smaller milestones and schedule specific times to work on each task. Just as you prioritise meetings with clients, allocate dedicated time slots for completing essential projects. This approach not only ensures that you stay on track but also prevents last-minute stress and overwhelm.
4. Seek Strategic Support: Recognise when you need additional support in navigating the complexities of running a financial planning firm. Whether you’re struggling with acquiring clients, managing finances, or implementing regulatory requirements, seeking strategic coaching and guidance can provide valuable insights and assistance. Sometimes, an objective outsider can offer a fresh perspective and help you address challenges more effectively.
5. Address the Root Cause: While short-term solutions can alleviate immediate stress, it’s crucial to identify and address the root cause of your overwhelm. If you’re feeling consumed by stress and uncertainty, consider whether there are underlying issues contributing to these feelings. Whether it’s a lack of business management experience or uncertainty about your practice’s direction, acknowledging the problem is the first step towards finding a sustainable solution.

Remember, it’s okay to ask for help when you need it. If you’re interested in exploring how strategic support can benefit your practice, don’t hesitate to reach out to us. We’re here to provide guidance, reassurance, and practical solutions to help you rediscover your passion for your work and achieve greater success in your financial practice.

For a confidential consultation, please visit our website or call us on 01472 728 030. Let’s work together to overcome challenges, optimise your practice, and ensure you get the restful night sleep you deserve. Your well-being and the success of your business are our top priorities.

As we celebrate International Women’s Day today, I wanted to take a moment to reflect on our journey in the financial services industry. Like many of you, I didn’t exactly plan to land here, but I’m grateful for the opportunities and incredible people I’ve had the privilege to work with at We Complement over the past three years.

We Complement is fortunate to partner with firms that prioritise inclusivity, but let’s not ignore the reality check from the recent House of Commons Treasury Select Committee report titled “Sexism in the City.” It’s disheartening to read about the widespread issues of sexual harassment and bullying that still plague our industry. It’s a sobering reminder that we still have a long way to go.

One thing that struck me from the report is the pervasive culture within the sector that holds back progress for women. It’s clear that addressing issues like pay disparity, harassment, and maternity leave requires more than just surface-level fixes. We need deep-rooted changes in our culture.

Recently, I had a conversation with a friend who, like many women in our industry, feels pressured to prioritise career advancement before starting a family. This mindset is concerning because parenthood should not be seen as an obstacle to professional growth but as a natural part of life’s journey.

On a positive note, the Office for National Statistics (ONS) data has revealed that women made up 47.3% of staff in the financial and insurance services sector for Q4 2023, this is a 3.26% increase from Q1 2023. Progress is happening, but there’s still much work to be done.

So, here are a few suggestions for how we can improve our culture and support women and men in our workplace:

1. Flexible working policies: Let’s rethink the traditional 9-5 and explore options like flexible schedules, part-time work, and job sharing. By accommodating the realities of childcare responsibilities, we’ll attract more talent and foster loyalty among our team.
2. Remote working/hybrid: Embracing remote work not only benefits the environment but also promotes work-life balance, especially for those juggling school drop-offs and pickups. Trust me, a motivated and engaged team can thrive with the right remote setup. Feel free to reach out to We Complement if you need a hand with this.
3. Maternity policies: Let’s value and support employees taking time off for family without penalising their career growth. It’s time to bridge the gap in salary stagnation between men and women post-parenthood.
4. Women in the boardroom: If our team is diverse but our leadership isn’t, let’s ask ourselves why. Representation matters, and it’s essential to have diverse voices at every level of decision-making.

Together, let’s continue striving for a more inclusive and supportive workplace where everyone can thrive, regardless of gender or family status.

Here’s to progress and positive change.

Here at We Complement, we’ve been immersing ourselves in extensive research to uncover what truly makes a standout Centralised Retirement Proposition (CRP).

A CRP isn’t just your typical Client Investment Proposition (CIP) with a few adjustments for retired clients. It’s about crafting a solid, repeatable, and reliable process specifically tailored for clients in decumulation. We’re honing in on the areas of financial planning that hold significant importance for individuals at this stage of life.

While there’s often overlap between your review processes for clients in accumulation and decumulation, this article is all about shining a light on how to adapt your review process for clients approaching retirement. Discover how these adaptations can be seamlessly integrated and documented within your CRP.

1. Frequency and type of review

As a client approaches and enters retirements, you may recommend that you meet for review meetings more regularly than when they were in accumulation. You might also feel that the client would benefit from in person meetings, rather than online or telephone meetings, to improve communication during what can be a period of significant change for many people. This could vary between sub segments of clients.

If there are any changes to how and when you meet your retirement clients for a review when compared to your processes for accumulation clients, this could be documented in your CRP. This demonstrates that you have considered the service you are offering your clients and whether it is still meeting their needs and providing value for money in this new stage of life.

2. Data gathering

How often do you ask your decumulation clients to complete a full fact find? Is there anything specific that would trigger a new fact find being requested?

Clients who are approaching retirement or who have recently entered retirement may experience a lot of life changes in a short period of time, compared to the average accumulation client. This could mean that you ask your clients to update their details more regularly when they reach retirement age. You may also have a different fact-finding process for clients once they reach this stage of their life. This is explored in more detail in our previous blog, Central Retirement Propositions – Deep Dive #3: The Fact Find.

3. Cashflow updates

Your approach to cashflow modelling and how often you update these models is something else that can be documented in your CRP.

How often do you run a cashflow model for your decumulation clients, and does this change depending on sub segments? Is this different for your accumulation clients?

You might also model more or different scenarios for your decumulation clients, use different stress testing methods, or incorporate tools like Monte Carlo simulations for certain clients.

4. Vulnerability

Clients can be vulnerable at any age. According to a 2022 survey by the FCA

https://www.fca.org.uk/data/financial-lives-2022-early-survey-insights-vulnerability-financial-resilience

47% of UK adults showed one or more of the key drivers of vulnerability, which are defined by the FCA as poor health, negative life events, low financial resilience or low capability.

However, as people get older, certain drivers of vulnerability, such as poor health or negative life events, may become more likely. Some clients may also consider retirement to be a stressful time, and so retirement itself could influence a client’s vulnerability.

How do you assess clients for vulnerability, and do you make any changes to your processes surrounding vulnerability for clients who are at or approaching retirement?

5. Event driven reviews

Certain events, whether life events specific to the client or world events that could affect all investors, could prompt you to arrange an ad hoc review meeting with a client. Your approach to this may change as clients enter retirement, and possibly vary between sub segments of clients.

For example, a market crash could affect all clients, but clients who are in decumulation may be affected more than clients who are in accumulation. Breaking this down further, clients who are at the start of their retirement journey and who are heavily reliant on their investments to provide them with an income may be particularly impacted by this. In contrast, clients who have significant secure income and who have already enjoyed many years of retirement may have less to worry about.

What is your process for identifying when retirement clients might benefit from a review outside of your agreed review schedule? Are there any particular trigger events that would prompt you to make contact with certain clients?

If you’ve been keeping up with our previous blog posts, you’re probably familiar with our exploration into what makes a top-notch Centralised Retirement Proposition (CRP). It’s essential to understand that a CRP isn’t just a Centralised Investment Proposition (CIP) dressed up for retirees. Instead, it should offer a sturdy and dependable process tailored to meet the unique needs of clients transitioning into decumulation, with a special focus on the financial planning aspects crucial during this phase of life.

In this week’s newsletter, let’s dive into how we can personalise the fact-finding process to better suit clients nearing or already in retirement, and how this tailored approach can lead to better outcomes for everyone involved. While the data we gather during the fact-finding phase might stay consistent across clients in both the accumulation and decumulation stages, there are specific topics of conversation that can truly enrich the process for those stepping into decumulation.

1) How do they plan to utilise their pension?

For a significant number of clients, the response may be quite simple: they aim to use their pension to finance their retirement years. However, other clients might have ample assets and income from other streams, so they don’t plan on tapping into their pensions. Instead, they view it as a strategic tool for estate planning. There are clients who’ve been contributing to a pension throughout their career, under the assumption that they’d depend on it during their golden years. However, as they edge closer to retirement, they realise that their needs and goals have evolved. Engaging in dialogues regarding how a client intends to use their pension becomes especially crucial as they contemplate or transition into retirement. While such discussions are feasible at earlier life stages, much will probably have transformed by the time a client enters retirement.

2) What is their vision of retirement?

As clients approach retirement, their perspectives on this life stage may alter. Some may arrive at their target retirement age only to realise they’re not prepared to cease working, while others might experience a contrasting revelation and opt for early retirement. Certain clients may conclude that a gradual retirement suits their needs best, whereas others might decide to continue working full or part-time until it’s no longer feasible. While these subjects can be discussed during earlier phases of life, it’s important to note that upon reaching the milestone of retirement, clients’ preferences could shift.

3) Exploring health history and lifestyle

The challenge of longevity risk and the duration a client’s pension needs to sustain them is fundamental in retirement planning. While some health, lifestyle, and family history data may have been collected earlier in the financial planning process, the approach of retirement presents an opportune time to delve deeper into all factors that could potentially impact a client’s lifespan, and subsequently, the longevity of their pension. This information could also offer insights into how a client’s activity levels and income requirements might evolve as they navigate through the different stages of retirement.

4) Addressing client concerns about retirement

The psychological aspect of retirement planning is equally as important as the practical considerations. Retirement represents a significant life change that, while often celebrated, can also trigger an emotional transition fraught with worries and concerns. Understanding these concerns can provide valuable insight into your client’s mindset and potential future reactions. For instance, a client accustomed to a regular income might find the prospect of relying solely on savings daunting, even if their savings adequately meet their income needs. Such clients may be more susceptible to overreacting to market fluctuations and could benefit from strategies that take this into account. Some concerns may be baseless, acting as unnecessary barriers preventing clients from achieving their goals. Other concerns, while valid, could still benefit from open discussion with their adviser. Encouraging clients to voice their worries and concerns about retirement can help create a retirement plan that is tailor-made for each individual, enhancing the overall client experience and outcomes.

The main takeaway is that the fact find you use for accumulation clients might not allow you to probe deeply enough into a decumulation client’s situation. In addition, alongside a standard fact find, an individualised approach to the fact-finding process, including open-ended questions, is crucial. This approach requires a comprehensive understanding of the client’s retirement goals and financial situation, as well as a deeper exploration into their health history, lifestyle, and potential longevity. Advisers must also address the psychological aspects of retirement, understanding and addressing any fears or concerns clients may have about this significant life transition. By tailoring the fact-finding process to each client’s unique needs and circumstances, advisers can create personalised retirement plans that enhance client outcomes and satisfaction.

We Complement have been assisting businesses in developing and integrating centralised systems for numerous years, rigorously testing them for robustness, reliability, and repeatability. If you’re interested in learning more about how we can lend our expertise to help you establish centralised systems, please visit our website or reach out to us. Whether you prefer to connect online or give us a call at 01472 728 030, we’re here to help!