Tailored Centralised Retirement Propositions (CRP) are crucial for advice firms in supporting their clients through retirement, with the retirement income market set for “stratospheric” growth, according to a Charles Stanley report.

Its Decumulation: It Requires a Different Approach report assessed insights from financial advice firms on the challenges of decumulation, highlighting how advice at and during retirement differed from accumulation advice.

Financial advice firms were found to be deploying various strategies to address new risks, including tax changes, longevity, spending uncertainty, investment, and sequencing risk.

Charles Stanley said that the spotlight on retirement advice and income was intensifying for wealth and advisory firms amid scrutiny from the Financial Conduct Authority (FCA) to ensure they offer robust and scalable retirement income propositions that differ from accumulation strategies, and to address new risks emerging through retirement.

As the UK’s population is ageing and more people are retiring with defined contribution (DC) pension benefits, the report emphasised that the retirement market was set to grow significantly, and this trend indicated a growing need for decumulation advice.

Research in the report from Alpha FMC showed that 90 per cent of client advice requests included retirement planning, while 65 per cent included investments and 42 per cent cited tax planning.

Charles Stanley said its report suggested that clients were demanding more support and engagement throughout retirement.

A “consistent concern” among advisers was the regulatory challenges in the decumulation phase, with firms having to demonstrate they were supporting their clients in line with the Consumer Duty.

Furthermore, the retirement landscape had “changed”, requiring tailored solutions for different client needs, with no standard retirement path amid a shift away from defined benefit pensions.

Charles Stanley stated that, among the diverse solutions used by firms, the development of CRPs was of particular interest.

It found that some firms had adapted their Centralised Investment Propositions to create CRPs, while others were developing ‘distinct’ CRPs.

“The growth in the retirement market is truly enormous and not to be underestimated,” stated Charles Stanley head of sales, Sean Osborne.

“The Consumer Duty and Thematic review of Retirement Income Advice clearly shows that this is a priority for the FCA, and there is an expectation for advice firms to develop a CRP that balances the need for flexibility that individuals need alongside providing a consistent approach across the firm.

“While decumulation attracts significant regulatory scrutiny, it also presents a substantial opportunity for advisers and advice firms to deliver innovative advice at this critical time in clients' financial lives.

“In the future, it will be crucial for advice firms to implement CRPs tailored to individual needs to support clients through retirement. Approaches designed for the accumulation phase will no longer suffice to meet all clients' needs.”

Alpha FMC partner and head of retail distribution practice, Bradley Northrop, commented: “We found broad recognition that advising clients in decumulation necessitates a different approach, the stakes are higher and the risks are different.

“Our research found a varied approach to the use of investment strategies with some firms exhibiting limited differentiation as advisers transition to support their clients into decumulation.

“We expect to see that a wider set of products and investment solutions will need to be considered by firms in the future to evidence how clients’ income needs are being sustainably addressed throughout their decumulation journey.”

---