Transcript Document

With our research
partners...
June 2014
Foreword
What do the following (and, if they have their
way, many specialist annuity providers) have in
common ?
1.
2.
3.
4.
5.
Lego
Apple
Marvel
Harold Bishop from Neighbours
Jesus
…the happy knack of coming back from the dead.
Now it might be (is) a tad early for such a grave
prognosis of "commercial death" for annuity
providers but that hasn’t stopped many
commentators. There’s no denying the short term
impact of the pensions budget bombshell was
immediate, significant and that initial sentiment has
translated directly into concerning new business
figures as well as share price decimation.
that nothing is permanent. Companies must
evolve in order to remain relevant and
profitable. Some, more than others, need a
stronger reminder of this, flirting with death
before getting their wake-up call.
…. But then again, with such a major change on the
horizon, it's hardly surprising that many will have
chosen to defer the decision to commit to an
annuity - even one of the new-fangled one year
fixed term annuities. Being intellectually justified in
"waiting and seeing" will be a very appealing state
of affairs for many.
Our extensive interviews with advisers show that
things are not as cut and dried as some make
out. This report sets out clearly how advisers see
the retirement market shaping up and points
clearly to what providers and platforms could
and should do in order to survive and thrive
against a backdrop of unprecedented change.
There is no greater truth in business than the tenet
We look forward to exploring the opportunities.
The retirement market has needed a radical
overhaul for some time, it’s just no-one
expected it to be so utterly inorganic and
profoundly non-negotiable.
With all best wishes for your success.
Tony Wickenden
Jt .Managing Director
Technical Connection limited
Phil Wickenden
Managing Director
So Here’s The Plan limited
e: [email protected]
m: 07802584743
e: [email protected]
m: 07966092075
Objectives
We have spoken to 175 of the type of advisers that you want to do business with in order to
explore what it takes to succeed “At Retirement” – who’s winning, who's losing and why. The
specific aims were:
To understand the size and scope of the market and identify current retirement
planning processes adopted by advisers and business being placed (now vs.
future).
To gauge perceived and expected impact of the latest environmental, legislative
and competitive changes on the market, including the budget announcements.
To identify key triggers to product and provider selection (including brand
perceptions, experiences and expectations) and what has changed post-budget.
To develop an intimate understanding of what is required to build better
propositions, support and communication in the Retirement market.
Methodology

175 advisers were interviewed from a
robust panel of 800 Technical
Connection adviser clients and over
17,000 advisers from So Here’s The
Plan’s growing database.

The sample comprised advisers who
were:

All interviews were conducted by
telephone, lasting 25-30 minutes on
average.

Interviews were conducted during Q1
and Q2 2014.

Participating advisers were offered
access to online client facing material
from Technical Connection in return for
their participation.

Individual anonymity agreed.
Nationally representative sample of firms in
terms of number of RI’s, geography and AUM
Respondent Profile (1)
Q. Approximately, what are your Assets under Management?
Q. How many Registered Individuals are there within the
business?
21+, 5.2%
11 to 20, 3.1%
5 to 10, 4.1%
£50m+,
27.7%
Under
£20m,
45.8%
£20m£49.9m,
26.5%
1 to 5,
87.6%

Closely mirroring the profile of advisory businesses in the UK, the majority of the businesses sampled (45.8%) had £0£20m in AUM while 87.6% had between one and five RI’s.

Over a quarter of the sample (26.5%) have AUM of between £20m and £50m.

A further quarter of the sample (27.7%) have AUM over £50m.

8.3% of firms interviewed had more than 10 RI’s in the business.
Respondent Profile (2)
Q. Which of the following best describe your service proposition(s)?
Three tiers defined by AUM

In order to understand more about the businesses
consulted we asked them to describe their service
proposition.

Incredibly, more than a year into the RDR, 38.8%
of firms stated that they had no formally defined
service proposition – with this across all size and
shape of firm.

Where service propositions were defined, the
majority segmented based on AUM (31.6%) or by
client preference / behaviour (23.5%).

Interestingly, only 11.2% of firms stated that they
only served clients with £100k+ in assets,
suggesting that firms are still keen to serve lower
net worth clients where possible.

This could, to some degree, explain why such a
high proportion of firms are still yet to determine
service propositions.
31.6
Defined by client behaviour /
preference
23.5
Only serve clients with £100k+
AUM
11.2
Specialist focus (e.g. retirement)
4.1
WHO ARE THEY?
Not formally defined
Interestingly, the profile of those without a formally defined
service proposition differed little from the overall population,
suggesting that firms of all shapes and sizes are still
grappling with the issue more than a year on from RDR.
38.8
0
10
20
30
% respondents
40
50
 1-5 RI’s (92.1%)
 +20 RI’s (7.9%)
 Under £20m (44.8%)
 £20m-£50m (35.5%)
 £50m+ (20.7%)
Contents
The At Retirement market – story so far
Page 8
The budget bombshell
Page 22
Other macro drivers
Page 45
The planning process & provider
selection
Page 53
Other retirement planning
opportunities
Page 77
Support provision & technology solutions
Page 88
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


Client profile and retirement planning penetration
Time spent planning across solutions
Solutions used in the last six months
Expected changes





Unprompted impact of announcements
Impact on solution selection pre-April 2015
Impact on solution selection post April 2015
Detailed impact by clients with varying pot sizes
Implications for product providers across retirement solutions





Response to Steve Webb’s annuity switching proposals
Impact (to date) of ABI code of conduct
Improving the regulatory framework
Primary sources of saving post Budget
Expected movement between NISAs and pensions






The consideration of all client assets in retirement planning
Outsourcing investment advice
The role of platforms in an ‘across all assets’ income provision strategy?
The importance of all investments in retirement planning
Influencing provider selection
Best providers across all retirement solutions




Auto-enrolment
Long term care
Estate planning
Equity release




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The importance of support (rating of seven key retirement planning supports)
Advisers select the best providers of support in each on the seven areas.
Service delivery benchmark
Technology in retirement planning – what’s valued and who delivers
The importance of risk – and adequacy of tools available
Gut response to budget announcements
 There’s no denying the short term impact of the
pensions budget bombshell was immediate, significant
and that initial sentiment has translated directly into
concerning new business figures as well as share
price decimation.
SAMPLE SLIDES
 But then again, with such a major change on the horizon, it's hardly surprising that many will have chosen
to defer the decision to commit to an annuity - even one of the new-fangled one year fixed term annuities.
Being intellectually justified in "waiting and seeing" will be a very appealing state of affairs for many.
 While a not insignificant number expect to see a move away from annuities (especially of the conventional
kind) towards greater cash withdrawals and drawdown, it is interesting to note the number who paint a less
certain (and certainly less apocalyptic!) picture.
 Just under half of advisers (without prompting) responded that either:
There will simply be a greater need for
advice or guidance
Or they will be advising clients to defer
decisions until April 2015.
They are uncertain how things will pan out
beyond there being a great deal more
choice(which is universally seen as a good
thing)
Gut response to budget announcements
Our extensive interviews with advisers show that it’s not as cut and dried as some make
out. Asked how the budget announcements will affect how they will be advising their
clients who are close to retirement or already retired
19% of advisers (the most
common unprompted response) claimed that changes announced in the budget will not
have any impact. Though these are gut responses, it is clear that opinion is divided:
SAMPLE SLIDES
Q. How do the changes announced in the budget affect how you will be advising your clients who are close to retirement or already retired?
(unprompted responses)
19% claim that there will be very little impact
17% also believe there will be a move away from annuities
17% simply state that there will be far greater need for advice
17% believe that people will just be deferring decisions
11% are unsure exactly how things will pan out beyond there being more options
10% believe more will take out bigger lump sums
6% expect there to specifically be an upturn in drawdown use
3% believe ISA contributions will increase
Gut response to budget announcements
 The only exception is the expected increase in need for
tax planning emerging from the anticipated withdrawal of
bigger lump sums.
 Increased options create more uncertainty and drives
many advisers to believe that the impending changes will
have a dramatic (and positive) impact on demand for
planning. There is a high level of consumer awareness of
the headlines but little knowledge.
It won’t really have an affect
“because
the option to retire and take
19%
Little impact
advisers
Greater need
for advice
a drawdown type policy was already
there. It will make a difference on
the tax free cash they can take
though.
“
 In terms of the advice process, many advisers don’t really
think much will change, with the consensus being that
people should still take advice and if they do they will get
the same kind of advice as before.
“
I think it’s quite a profound change
already, in terms of taking into account
other options. Clients know about the
headlines but not about the implications on
that. Such as short-term tax or long term
running out of money.
SAMPLE SLIDES
made us have a rethink whether
“theyt’sshould
annuitise or look at other
routes.
 For a small number that didn’t already have a license to
advise on drawdown, that will now become imperative.
 As above, there are more that expect to advise clients to
wait until greater clarity is there.
“
11%
advisers
Unsure
The choices will be greater. It will help the
advice process, people will need to seek more
help because there are more options; more
dangerous options!
“
It’s very difficult to say. I’ve just been on the
phone to a client now who wants early
retirement. I advised to wait until next year.
“
 There remains a good proportion who remain unsure
exactly how the changes will impact their business.
“
advisers
Deferring
Decisions
We are in limbo at the moment. The
attraction of taking the whole thing in cash
has prompted people to hold off the
decision.
“
 For these clients, some advisers are recommending
drawdown as a stop-gap.
17%
“
“
 If there’s any chance that a client may take a significant
lump sum most advisers are advocating a ‘hold’ strategy
with decisions being deferred.
advisers
“
 Longevity is also expected to be a big issue and the need
to bridge expected and actual retirement incomes can
only be filled with full advice.
17%
Short term impact (pre April 2015)
Q. In light of the changes, for those considering drawing benefits for the first time before April 2015 what % of them are likely to take?
Had there been no budget changes
Post budget announcements
28.3
25.8
24.5
21.1
14.1
21.0
14.0
21.0
13.9
10.7
SAMPLE SLIDES
4.9
0.8
Capped Drawdown
Flexible Drawdown
Fixed Term Annuity (to
buy time)
Enhanced Annuity

We asked advisers what proportion of clients who will be considering
drawing benefits for the first time before April 2015 will take various
following options vs. the options they would have selected had the budget
announcements not been made, highlighting that the market will be
radically altered.

Advisers think annuities (of all types – though less so for enhanced) will be
the biggest casualties, with (pre April 2015) a 40% reduction in the
proportion of clients considering any type of annuity – numbers that chime
with some of the reported on figures we are seeing (see Standard Life).

Put starkly, annuities accounted for 60.8% of retirement solutions in a prebudget world and only a projected 36.6% post budget - though it’s also
important to note that 20% advisers are undecided. Annuities from "small
pots" look set to be the real casualties.
Other Annuity (specify)
“
No Decision
Put starkly, annuities accounted for 60.8%
of retirement solutions in a pre-budget world
and only a projected 36.6% post budget .
Product
Capped Drawdown
Flexible Drawdown
Fixed Term Annuity (to buy time)
Enhanced Annuity
Other Annuity (specify)
No Decision
”
Change %pts.
3.1
-0.1
-10.4
-4.8
-9
20.2
Looking ahead (post 2015)
Q. For those considering drawdown for the first time after 5th April 2015 when drawdown becomes completely unconstrained, what % do you think will…
Annuitise
17%
Other.
3%
Drawdown in instalments.
56%
SAMPLE SLIDES
Drawdown the entire fund in
cash in one sum.
24%
 For those considering drawdown for the first time after 5th April 2015 when
drawdown becomes completely unconstrained, advisers expect a heavy skew
to drawing down in instalments (56% of clients).
 Though just under a quarter of clients are expected to draw down the entire
fund in one lump sum with only 17% expected to annuitise… based on the
solutions that are available now.
Tony Wickenden, Joint MD, Technical Connection
e:[email protected]
m: 07802584743
Phil Wickenden, MD, So Here’s The Plan
e:[email protected]
m: 07966092075
Thank you
We look forward to
exploring the
opportunities with you