The FCA has said the review will be “an important indicator of how firms are implementing the Consumer Duty”.

Our own research report, Life Beyond Work: The changing face of retirement suggests that many advisers recognise they may need to revise their approach to retirement advice but would value some clear direction from the regulator before doing so. It therefore seems inevitable the review will find some areas where change is needed.

I’m hopeful, perhaps even confident, that the regulator will recognise how challenging providing effective retirement advice is. It is almost certainly the most difficult financial planning problem, full of uncertainty and technical complexity.

See also: Advisers say economic climate prompting clients to change retirement plans

While there will always be room for improvement, it’s important that the FCA and industry can work constructively to ensure the supply of quality retirement advice is expanded, not constrained further. While retirement advice is important today, it’s set to become even more so for all involved.

Client needs in retirement are pretty consistent – to maintain their standard of living until they die and not run out of money. However, client circumstances are changing. The decline of defined benefit pensions means the next generation of retirees will be more reliant on retirement savings than the boomer generation.

Sandwiched between ageing parents and boomerang kids, many of today’s retirees also face greater demands on their wealth than their parents did. Add in more complex family structures and meeting those core client needs becomes even more difficult. Retirement advice will become even more complex and increasing its accessibility will be key.

Assets for clients who are approaching, at, or in retirement already constitute the majority of advised assets and almost certainly generate the lion’s share of adviser fees. The need for ongoing advice in retirement is, to my mind, indisputable, at least for clients who remain invested.

See also: Most investors not reviewing their pensions annually, research finds

Keeping clients on track against their retirement plan, helping them optimise their tax position, and navigating the inevitable bumps in the road are all value-added activities that merit an ongoing fee.

Demand doesn’t seem to be an issue either. Only 16% of advisers told us that attracting new retirement clients was a business challenge for them. With fee pressure mounting and challenges around the value of advice, retirement clients are likely to become even more important to adviser businesses and those that support them.

Success story

Effective and affordable retirement advice is also essential from a government perspective. The introduction of automatic enrolment has been a huge success by almost any measure. However, it can only achieve its policy objective of improving retirement living standards if participants have the right support when deciding how to access benefits.

Evidence to date suggests that many can and do make irrational decisions when accessing benefits, drawing too much income and/or paying too much tax. As pension pots grow, the importance of converting assets to sustainable income will increase. While the FCA’s recent thoughts on enhancing guidance may help people avoid some retirement mistakes they will not be a substitute for advice.

An effective and efficient retirement advice market is essential for all participants – clients, advisers, financial services firms, and government. To achieve this, we need to work together to take on the challenges of changing client circumstances and the more hostile market and economic environment that we’ve seen in recent years.

A pragmatic and constructive approach to developing the regulation of retirement advice is essential to achieving this and the FCA’s thematic review will set the tone for this important discussion. I hope the Easter Bunny doesn’t disappoint.

Richard Parkin is head of retirement at BNY Mellon Investment Management

ESG-focused funds recorded their first ever year of net withdrawals.

On a more positive note, gross annual flows were up on 2022, though they remained below the levels recorded in 2020 and 2021.

Passives dominate inflows

BlackRock attracted the most net new business for the 10^th consecutive year, pulling in £30.1bn gross retail sales and £6.4bn annual net flows.

Legal & General Investment Management also posted a strong year with a 26% rise in gross sales compared with 2022. It attracted £3.1bn net new business.

Fidelity and HSBC, meanwhile, also recorded strong net and gross flows. Between the four firms, 71% of new flows went into passive offerings.

Royal London Asset Management was the top ranked active fund manager for both gross and net sales. While in previous years it has seen the highest inflows into its sustainable funds, in 2023 its best sellers were short dated fixed income and money market funds.

See also: The Lang Cat: Advised platforms suffer record outflows in 2023

M&G and BNY Mellon were new entrants to the top 10 for gross new business after annual sales growth of 90% and 22% respectively.

M&G’s Japan and Emerging Markets Bond funds ranked among the best-selling retail funds over the year, while BNY Mellon’s Multi-Asset Balanced fund also received significant attention from retail investors.

Report editor Anna Pridham said: “Gross sales show that established groups like Schroders, Jupiter, BNY Mellon, and JPM are attracting significant new flows. However, as mature businesses, they also contend with high levels of natural outflows and switches.”

In terms of Q4 flows, most leading managers recorded a rise in gross sales compared to the previous three months.

Pridham noted that, against a backdrop of an impending general election in the UK and ongoing economic uncertainty, the outlook for asset managers in 2024 remains uncertain.

“However, with the prospect of easing inflation and anticipated interest rate cuts, investors may be finally ready to deploy the record amounts of cash waiting in the wings. The fund groups with the right products stand to benefit,” she said.

This article was written for our sister title Portfolio Adviser

The strategies, including the BNY Mellon Global Dynamic Bond, BNY Mellon Sustainable Global Dynamic Bond and BNY Mellon Global Dynamic Bond Income fund, were placed under suspension in June 2023. Ella Hoxha, formerly at Pictet, took over as fund manager in December of last year.

Square Mile stated that after meeting with Hoxha and discussing the changes to the portfolios, its team believes “it will take time to fully appreciate the impact of those changes”. In addition, Square Mile found the medium-term returns “not in line with expectations”, resulting in the funds’ removals.

Jupiter Value funds, including the AAA-rated Jupiter UK Special Situations fund and A-rated Jupiter Global Value Equity fund, were suspended after Ben Whitmore and Dermot Murphy announced their departure for July 2024 to create their own investment boutique. While JO Hambro Capital Management’s Alex Savvides will take on the UK equities portion of the funds, there is still discussion over the global equity assets and whether they will transfer with Whitmore, Square Mile said.

See also: RLAM and Artemis funds added to Square Mile academy

Despite the three funds dropped from BNY Mellon, the BNY Mellon Futurelegacy fund range gained a responsible Positive Prospect rating. The group of five funds are managed by Newton Investment Management and launched in February of last year.

“In what is an under-represented area of the market, Square Mile believes this range has all the attributes necessary to provide competitive long-term returns while following the team’s sustainable investment approach,” Square Mile stated.

The Brown Advisory Global Leaders fund was awarded an AA rating, managed by Mick Dillon and Bertie Thomson. The fund, launched in 2015, comprises 30 to 40 holdings which Square Mile claims is “differentiated from its peers and a very solid offering for long-term investors”.

Aikya Global Emerging Markets gained a Responsible A rating while Rathbone Greenbank Multi-Asset portfolios obtained a responsible recommended rating.

Three strategies, the CT UK Social Bond fund, Artemis SmartGARP Global Emerging Markets Equity fund, and WS Montanaro UK Income fund retained their ratings despite changes in management.

In total, Square Mile conducted 52 interviews with 31 asset management groups in the month of January.

This article was written for our sister title Portfolio Adviser

Three quarters (75%) of advisers said that inflation and the cost of living are current concerns for their clients, when considering retirement income.

Two thirds (66%) of advisers also indicated that market uncertainty is a key worry for their retirement clients.

Changing family dynamics were highlighted too with more than a quarter (29%) of advisers referred to retiree client concerns about the rising cost of supporting their family.

As a result of these pressures, 67% of advisers believe their clients will choose to delay retirement and 56% expect clients to reduce pension withdrawals.

The survey also revealed that more than half (51%) of advisers view meeting client expectations as their biggest business challenge over the next few years. Just under half (44%) said that clients moving money from investments to cash savings is a potential issue for their business.

To read more on this topic, visit: 91% of advisers concerned about losing assets in Great Wealth Transfer

Richard Parkin, head of retirement at BNY Mellon Investment Management, said: “The higher cost of living coupled with poor market performance means clients need their advisers to help them get more from less.

“While we expect these challenges will continue to drive demand for retirement advice, advisers are having to help clients reassess what retirement means for them and build realistic plans to achieve this. Part of this involves ensuring clients are invested appropriately to support these plans. While markets remain challenging in the near term, advisers can ensure clients are invested in longer-term opportunities.”

Regulation

Nearly two thirds (61%) of the advisers surveyed also highlighted the challenge of changing regulation.

More than half (54%) expect to make greater use of cash flow planning in the next one-three years while 62% said they were influenced by the regulator’s view of the importance of this tool.

Just under a quarter (23%) of firms believe they need to make changes to their retirement-income investment strategy.

Nearly two thirds (61%) of these firms cited regulatory expectations that advisers use a different set of portfolios for clients in decumulation, from those they use for clients still accumulating wealth

Parkin added: “Our research suggests some advisers are uncertain about the long-term impact of the consumer duty and precisely what, if any, changes need to be made to their retirement advice approach.

“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. We expect that these changes along with shifting economic and market conditions will prompt advisers to reassess the products and portfolios they use for retirement-income clients.”

Longer-term impacts

The report indicated that advisers are considering more fundamental changes to their business models, including a wider range of advice services.

Some 44% expect to have greater involvement in long-term care planning and 42% see an increased role around providing housing advice.

While nearly a quarter (22%) said they expect lifestyle coaching to become more of a focus for advisers in the next three years.

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

BNY Mellon PinPoint provides insights aimed at helping advisers to make informed investment decisions to build more resilient and refined model portfolios, while considering factors including their clients’ investment objectives, risk appetite and time horizon.

The service also provides advisers access to asset class research, risk factor analysis, stress testing based on current market conditions and historical performance data, manager research, objective-based investing, global macro context and market analysis, and tactical insights.

Advisers can compare one fund with another or see the impact from combining funds in a portfolio using the service.

To read more on this topic, visit: Defaqto reveals most recommended MPS by advisers

PinPoint launched in the US two years ago and, after what BNY Mellon IM global head of distribution Matthew Oomen described as a huge take up among advisers, it plans to grow the service to Emea.

Oomen, global head of distribution told UK Adviser: “Markets are more complex than ever and what clients need is greater insight into how their portfolio is constructed and how it would behave in different macro scenarios.”

“We created BNY Mellon PinPoint to help advisers position their portfolios for any market environment based on sophisticated risk analytics with a seamless, customisable digital experience. This experience also includes access to the full breadth of services, products and investment capabilities of BNY Mellon, which touches 20% of the world’s investable assets.”

“With BNY Mellon PinPointSM, we’re delivering a client-centric investment solution,” added Eric Hundahl, Head of Portfolio Strategy at BNY Mellon IM.

“From our initial rollout of the tool in the U.S., the feedback we received was positive – information was easy to digest, and the actionable steps communicated in order to strengthen portfolios were a game changer. We look forward to rolling this out to clients in the UK and Europe.”

In August, BNY Mellon launched the BNY Mellon Multi-Asset Moderate Fund, which is managed by head of mixed assets at Newton IM Paul Flood.

It followed the launch of its FutureLegacy multi-asset range back in February.