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!