Advised clients feel more confident about achieving their retirement goals after receiving financial advice, as demand looks set to increase amid a changing regulatory landscape, analysis from BNY Investments and NextWealth has found.

The report, Retirement advice in the UK: Time for change?, highlighted the value of client/adviser relationships and how advice firms were responding to the Financial Conduct Authority’s (FCA) thematic review of retirement income advice.

It found that, ahead of the Budget in October, 73 per cent of financial advisers believed that changes to tax rates and allowances would increase demand for retirement income advice.

Furthermore, the treatment of pensions on death would have “wide-sweeping impacts”, with 61 per cent of advisers stating this would impact all or most of their clients.

Nearly three quarters (72 per cent) of advisers revealed they typically recommend that clients draw down other assets before pensions to limit the impact of inheritance tax.

BNY Investments and NextWealth also found that advised clients were concerned about incomes and outgoings in retirement.

The top three concerns advisers heard from their retirement clients were running out of money (50 per cent), inflation and the cost of living (48 per cent), and long-term care costs (42 per cent).

The report highlighted clients’ confidence in adviser relationships, with 92 per cent of advised clients feeling on track to achieve their retirement goals, while 81 per cent got peace of mind from entrusting their finances to an expert, and 85 per cent felt their advice fees provided value.

Financial advisers expected assets held by their retirement clients to increase to 61 per cent of their total business in the next three years, but 48 per cent forecast that the impact of regulation would limit the time they can take to deliver financial advice and constrain their ability to meet demand.

However, the research identified several areas in which financial advice firms were still focusing efforts to adapt in response to changing regulation, including the review of retirement income advice.

The FCA stated that withdrawal rates need to reflect individual client circumstances, and findings showed that use of cashflow planning to do this was increasing, but 27 per cent of advisers always or often use a fixed rate or range to set withdrawals where clients are using drawdown to create an income for life, “suggesting further change is needed”.

More than a quarter (28 per cent) of advice firms had no plans to introduce a centralised retirement proposition, and 59 per cent had made, or expect to make, changes to record keeping for retirement income client advice and interactions.

“These findings show that financial advisers play a central role in helping individuals achieve the retirement they envisage despite operating in an increasingly complex environment,” commented BNY Investments head of retirement, Richard Parkin.

“We are committed to helping financial advisers both understand and navigate changes, to enable them to focus on their roles in delivering client service and retirement income outcomes to the UK population.”

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