Seven years is the ‘magic number’, say Brooks Macdonald and The Verve Group in new research on the decumulation market

Decumulation advice, along with the Ongoing Services review are clearly on the FCA’s radar and it is imperative that advisers have the right processes in place to mitigate the risks of foreseeable harm under the Consumer Duty.

In response, Brooks Macdonald and The Verve Group have published The Retirement Income whitepaper to help financial advice firms translate the FCA’s guidelines around building a Central Retirement Proposition (CRP) into a tangible step-by-step framework, providing metrics for evaluating good client outcomes.

Key findings of the whitepaper include:

1. Seven years is the key number when determining whether a client requires a decumulation strategy. If withdrawals are needed prior to this, an alternative investment strategy to the accumulation strategy is required. A common misconception in this approach is that shorter-term requirements should lead to lower risk investments.
2. Some of the biggest challenges advice firms will face are around data, MI, record keeping and the due diligence process followed in arriving at their proposition to meet the needs of their clients. In light of new regulation, firms will need to look deeply at how they record all advice provided and how this can be integrated into reporting documents for clients.

Commenting on the release of the white paper, Andrew Lewis, Senior Investment Director and Head of Wales and the West at Macdonald, stated: “The evolution of the UK retirement market brings new opportunities and challenges for advisers to consider as they help clients achieve their retirement objectives. Now, mounting regulatory pressure, driven by the thematic review on Retirement Income Advice, demands a more considered, data-led evaluation of decumulation advice. Our whitepaper is designed to equip advisers with the right tools and framework to mitigate risks that clients face when approaching or during the decumulation stage of their investment journey.”

Christian Markwick, Head of Adviser Support at The Verve Group, noted:“The fundamental difference in the stages of a client’s life and post-retirement require different forms of advice and processes for firms to follow. A CRP is far more than just a firm’s investment-based offerings – it covers a whole magnitude of areas from target market, advice process, service proposition, MI, the technology used, and considerations for how risk is assessed and managed. With this whitepaper, we aim to share some insight into how firms should look to approach associated challenges and ultimately arrive at a proposition that best meets the needs of their clients”.

Download a copy of the whitepaper “Retirement Income” 

Notes to editors
 

Brooks Macdonald Group plc

Brooks Macdonald Group plc, through its various subsidiaries, provides leading wealth management services in the UK and internationally. The Group, which was founded in 1991 and began trading on AIM in 2005, had discretionary Funds under Management of £17.9 billion as at 31 March 2024.

Brooks Macdonald offers outsourced discretionary investment management for intermediaries and advice-led integrated wealth management for private clients. The Group also acts as fund manager to a range of onshore and international funds.

The Group has fourteen offices across the UK and Crown Dependencies including London, Birmingham, East Anglia, Exeter, Leeds, Manchester, Nuneaton, Southampton, Tunbridge Wells, Scotland, Wales, Jersey, Guernsey and Isle of Man.

The Verve Group

The Verve Group is changing the face of finance; both within the industry and outside it.

Established in 2009 with their industry-renowned brands - Para-Sols, Apricity Compliance, and The Art of Finance, The Verve Group was introduced as an umbrella brand to bring together their compliance, paraplanning, training and competency and proposition services and are an award-winning independent provider of outsourced support services and consultancy for financial advice firms.

The Group have a team of experienced financial services professionals ready to offer support to adviser firms of all sizes. The range of services includes establishing a compliant and robust business proposition.