Drawdown review
Managing customers through the drawdown review process
USP drawdown rules were introduced in 2006, and with the review interval being increased to 5 years, the first formal reviews are now upon us. With the impact of market volatility and sustained low bond yields, many advisors are concerned about the difficult conversations they face with clients, many of who could be facing significant reduction in income limits.
Building a drawdown plan involves a difficult trade-off between current withdrawal level (should I draw the maximum income?), risk of future income shortfall, and access to capital on death.
Given the difficult market conditions and impact on many drawdown plans, advisors need to review the client’s priorities, present the available options and explain the associated risks. This can be turned into a much more constructive experience for the client:
- Reduced income can be mitigated by converting some of the remaining fund into annuity.
- Adjusting the investment strategy can go some way to limiting the risk of further income shortfall.
How can the different options and risks be presented in way which reflects the client’s individual retirement needs?
Our Solution
Barrie & Hibbert have been building tools to help advisors manage retirement income plans for many years. Enhancing these to meet changing rules and the needs of our clients, we have recently developed the Drawdown Review Analyser. The tool allows advisors to assess the sustainability of an individual client’s current drawdown income plan, given the underlying investment strategy, and to identify options that can mitigate the impact of a reduced GAD limit and put the customer’s retirement plans back on track.
-
Understand the sustainability of your current retirement income plan
-
Evaluate options to put your client's retirement plan back on track.
-
Illustrate the benefits of a revised retirement plan
Benefits:
Working with Barrie & Hibbert to enhance your drawdown review service:
| Efficiency & Consistency |
Develop an efficient and profitable drawdown review service. Ensure consistency across clients and between review meetings. |
| Competitive Differentiation | Create competitive advantage through a “best-practice” approach to sustainable retirement planning and review. |
| Support Advisor Charging |
Regular review of retirement plans is required to keep clients’ income drawdown plans “on track”. Enhance the quality of your advice service and demonstrate the value of ongoing regular review. |
| Transparency |
Use retirement income sustainability as an objective measure to explain the options available to your client. Illustrate the risk of future income shortfall explicitly, in a way which directly reflects your client’s long-term retirement needs. |
| Compliance | Justify the suitability of your advice and record a clear audit trail for your recommendations. |
| Independence | Using the market-leading risk modelling specialist, demonstrate the validity and technical credibility of your advice service proposition. |
