Providing suitable advice resulting in sustainable income

27 October 2020

Covid-19 has created the perfect storm of falling capital values, combined with income drying up due to dividend suspensions and reductions, creating a greater need for advisers to sharpen their focus on risk and sustainability.

The impact of COVID-19 on the financial affairs of those reliant upon their savings to provide them with an income is being felt. This is caused by the perfect storm of falling capital values, combined with income drying up due to dividend suspensions – sequence risk in real time.

The reality for many clients with retirement income portfolios is that their capital value will have fallen since the start of the COVID-19 crisis. This in turn will present clients, and their advisers, with a number of options and decisions to make at the next review.

A tailored investment approach

The current climate has further highlighted the need for advisers to take a more tailored approach to clients’ investments. It is not uncommon for advisers to recommend investment strategies designed for accumulation to clients in need of income.

However, accumulation and decumulation are very different needs. And it may be better to offer the two strategies, which can often take the form of a separate CIP (Central Investment Proposition) for accumulation and a CRP (Central Retirement Proposition) for those clients needing income.

Sustainable income

“We may be living through unprecedented times but thoroughly explaining and assessing risk has always been key for an adviser to provide suitable advice. Many clients, currently in or approaching drawdown, will be feeling vulnerable and advisers should keep in mind that the attraction of a strategy more tailored to providing a sustainable income for life may become the overriding need” David Cartwright, Head of Insight and Consulting for Wealth and Protection says.

“Our latest CPD guide, created in partnership with Royal London, looks to arm advisers with an in-depth understanding of how to provide suitable advice that results in sustainable income. Not only by giving a detailed explanation of how to review risk but also how to tailor the approach to both accumulation and decumulation" he adds.

Want to learn more?

Our CPD accredited document, Using drawdown to provide a sustainable income, is full of key facts and tips to help you research and provide compliant recommendations.

You can download this guide for free here.

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