Canada Life and Defaqto have published a drawdown review guide following research which revealed that 69 per cent of financial advisers' clients were concerned about the impact of Covid-driven market volatility on their retirement plans.

Furthermore, almost half of advisers (43 per cent) believed that Covid-19 and the subsequent market volatility had made their drawdown clients more demanding of their time.

Canada Life and Defaqto have partnered to create free drawdown review guides, designed for both customers and advisers, stating that, given the “significant market volatility”, there is likely to be some challenging conversations during upcoming drawdown reviews.

The guide, which is CPD accredited, will support the advice process and prepare clients for a review, ensuring that any changes to clients attitude to risk is captured.

It explains the key aspects that should be considered in every drawdown review to provide a “clear evidence-based pathway forward”, and evidence of ongoing suitability and sustainability.

These include: initial capital balance, withdrawal amount, duration, level of sequence risk, reduction in yield, and residual capital.

Defaqto highlighted that stock markets around the world had fallen by up to 35 per cent during the start of the year, creating a “perfect storm” for those in drawdown, that they may not recover from, primarily due to “sequencing risk”.

It also explained that whilst clients may expect a specific income from their drawdown arrangement, they many not have considered sustainability, stressing that this is down to the adviser to educate their client on what a sustainable drawdown rate should be.

The guide contains resources which will support advisers with their clients, such as an explanation on sequence risk, as well as applicable work resources, including a review template and a suitability checklist.

Canada Life technical director, Andrew Tully, commented: “It’s clear that the short and long-term impacts of Covid-19 are only now starting to be felt and understood.

“Clear communication is crucial and an annual review is an integral part of that process.

"Our guide, written in conjunction with Defaqto, aids the design of a robust and repeatable process which can help you demonstrate the right way forward for each of your drawdown clients."

He added: “Advisers may also be starting to consider how to factor in any lasting changes of today’s ‘new normal’ such as whether investment weighting in commercial property should be altered or whether a property is still the reliable source of income it once was. We will never know what the future holds however by helping people make decisions for the right reasons you can help your clients enjoy tomorrow.”

Share Story: