New research from NMG Consulting for BNY Mellon Investment Management entitled “Life Beyond Work: The Changing Face of Retirement” was released in London this week, revealing changes in retirement planning and advisor business models.

Research from NMG Consulting for BNY Mellon Investment Management reveals that 75 per cent of UK financial advisors identify the cost of living as a key concern for retirees, and it affects savings.

The new report – Life Beyond Work: The Changing Face of Retirement – which surveyed more than 200 UK retirement focused advisors alongside 64 qualitative discussions with consumers, retirement specialists and industry experts, suggests that most wealth brackets are affected by today’s economic environment.

Market uncertainty is also a challenge, with 66 per cent of advisors saying that this is a major worry for retired clients, the survey reveals. These concerns are often compounded by changing family dynamics. Twenty-nine per cent of advisors recognise that retiree concerns over the cost of supporting family are rising, often driven by next generations sandwiched between financial support for children and parents, the firm said.

As a result of these pressures, 67 per cent of advisors believe that their clients will choose to delay retirement and 56 per cent expect clients to reduce pension withdrawals to protect their retirement outlook.

Flexing under pressure
This process adds pressure on advisors, with 51 per cent identifying that meeting client expectations will be their biggest business challenge over the next few years. In addition, 44 per cent of advisors see clients moving money from investments to cash savings as a potential issue for their business.

“The higher cost of living coupled with poor market performance means clients need their advisors to help them get more from less,” Richard Parkin, head of retirement at BNY Mellon Investment Management, said. “While we expect these challenges will continue driving demand for retirement advice, advisors are having to help clients reassess what retirement means for them and build realistic plans to achieve this. Part of this will be ensuring clients are invested appropriately to support these plans and while markets remain challenging in the near term, advisors can ensure clients are invested in the longer-term opportunity.” 

Regulatory concerns rising
The impact of changing regulation is seen as the biggest business challenge for the next few years, with 61 per cent of retirement advisors citing this as an issue, the survey reveals.

Changing regulatory expectations are already driving firms to reassess how they deliver retirement advice. For example, 54 per cent of advisors expect to make greater use of cash flow planning in the next one to three years, with 62 per cent being influenced by the regulator’s view of the importance of this tool, the firm said.

Twenty-three per cent of firms believe that they need to make changes to their retirement income investment strategy. Sixty-one per cent of these cite regulatory expectations that advisors will use a different set of portfolios for clients in decumulation from those they use for clients still accumulating wealth, the survey shows.

“Our research suggests some advisors are uncertain about the long-term impact of the Financial Conduct Authority Consumer Duty and precisely what, if any, changes need to be made to their retirement advice approach” continued Parkin. “The FCA’s current thematic review of retirement income advice should hopefully provide some guidance, but firms already anticipate a need to further tailor their approach to retirement clients’ specific needs,” he said. “We expect that these changes along with shifting economic and market conditions will prompt advisors to reassess the products and portfolios they use for retirement income clients.” 

Longer term impacts
Advisors are consequently considering more fundamental changes to their business models, including providing a wider range of advice services. Advisors see the potential for growth in key areas of retirement advice such as inheritance and tax-planning but also recognise their potential to get involved in additional areas, the firm continued. Forty-four per cent expect greater involvement in long-term care planning and 42 per cent see an increased need for providing housing advice.

Some advisors are also adopting a hyper-personalised and holistic offering for clients, considering a wider pool of assets and sources of wealth to inform their recommendations. Broader lifestyle coaching is expected to become a focus for advisors, with 22 per cent expecting this role to increase in the next three years, the report said. 

“One thing that won’t change is the importance of the advisor relationship. Amidst all this uncertainty, the opportunity for advisors to serve as trusted guides and to help their clients navigate these challenges will only grow,” Parkin added.