Factors to consider in the drawdown advice process

30 October 2019

One of the main issues with drawdown is that individuals enter into it without understanding the implications. In addition, advisers have not always evidenced the suitability of their strategy and so may not understand the implications of their decisions.

Professional financial advisers and paraplanners can add considerable value by helping their clients avoid the common pitfalls, including tax on withdrawals and contributions, and lost capital. Having a defined process will help you identify these pitfalls and issues, while ensuring your advice remains suitable and compliant.

We have previously covered the asset cascade for planning an income in retirement, and recently we hosted a webinar focusing on income in retirement that is currently available on our BrightTALK channel.

Focusing on the advice process

To assist with the process, Defaqto has produced a CPD-accredited guide that helps identify the factors to consider in the advice process, and how to mitigate some of the issues and risks involved. It is packed full of facts and tips to help you research and produce comprehensive and compliant recommendations when advising on producing income from existing defined contribution (DC) pension savings.

It is important not to forget that a drawdown solution should be reviewed on a regular basis as circumstances and needs evolve. Getting just one element of the advice process slightly wrong has the potential to destroy the standard of living for clients and those dependent upon them for the rest of their lives.

A shifting market

“Drawdown has been a vital tool, allowing those in or approaching retirement to achieve often long-standing financial goals that would otherwise have been beyond their reach. It undoubtedly has a key role to play in providing a secure and comfortable retirement for millions of people, when used appropriately. This is why the role of regulated advice in the drawdown process is so important – advice allows clients to achieve their short-term goals while maintaining their long-term financial security throughout retirement” says Richard Hulbert, Insight Analyist (Wealth).

“Particularly now, in a shifting market landscape where a diversified portfolio is needed, the role of advisers is more important than ever. This guide is designed to provide a structure, the data, and illustrations to help advisers provide compliant and suitable advice. This includes guidance on how to navigate the drawdown process by connecting income source to income needs, how to explain and manage the key risks of longevity, inflation, and sequence and how to evidence initial and ongoing suitability. As ever, the very popular due diligence advice checklist is included” he adds.

Want to learn more?

For more details, and to compare the schemes for yourself, download our CPD accredited Professionals’ guide to drawdown 2019/20 for free here.

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