Income withdrawal strategy (IWS) is top of the list of focus areas for financial advisers following the publication of the Financial Conduct Authority’s (FCA) Retirement Income Review, analysis from Standard Life has found.

The FCA's review, conducted nearly a decade after pension freedoms were introduced, found a "mixed picture" on the retirement income advice offered to savers, with financial advice firms asked to review their processes in light of the findings.

Standard Life's survey found that just over a quarter (26 per cent) of advisers expect the review to lead to better outcomes for their clients, although nearly half (44 per cent) do not think the review will make any difference to client outcomes.

Looking further at the industry response to the FCA's review, Standard Life found that IWS was the top takeaway for advisers, with 16 per cent citing it as their main focus after the FCA found that the IWS needs to consider current and future income needs and should be tailored to customers circumstances and objectives, suggesting that this should be illustrated to customers in a variety of scenarios, particularly taking longevity into account.

Suitability was the next area of focus, identified by 14 per cent of advisers, with the FCA's review having also highlighted the importance of a full fact find with no gaps or missing information.

This was followed by cash flow modelling (13 per cent) and periodic reviews (8 per cent), as the FCA's review found that not all firms had given their customers an annual review and some were unable to provide this information as it had not been recorded centrally.

However, advisers had mixed views on the level of innovation and choice among providers, with 28 per cent saying there isn’t enough choice or innovation in the market, whilst nearly two thirds (62 per cent) believe that providers are already adapting to the changing behaviour of advisers and customers following the 2015 pension freedoms.

Commenting on the findings, Standard Life retail advised managing director, Chris Hudson, said the retirement advice market has been a “huge” growth area in recent years, as the changes facing clients about how to best manage and access pension savings in their journey to and through retirement are significant.

Hudson also acknowledged that moving from a regular salary to a pot of money that needs to last for the rest of your life is a “daunting prospect”, arguing that advice is “crucial” in managing this.

He continued: “These findings chime with the tone of the FCA’s review. The advice market has changed dramatically in the last ten years both as a result of the pension freedoms but also in response to improvements in technology and regulatory reform.

“We don’t expect any let up in the pace of change and there’s plenty of scope for innovation in retirement income solutions.

“We know that nine in 10 people are looking for income security in retirement, but also want to hold on to an element of financial freedom and be able to access their pension savings flexibly.”

Hudson stated that the FCA “echoed” this in the Retirement Income Review when they discussed the need to identify the client’s minimum income needs and essential expenditures.

He said that the “good news” is they are starting to shift towards a “best of both strategy” which combines the certainty and security offered through annuity with the flexibility and growth potential of remaining invested in drawdown.

“Other retirement income solutions such as smoothed managed funds can also help reduce the uncertainty of investing by providing some shelter from the daily ups and downs of the stock market,” he added.

“Advisers will be looking to address most client’s twin goals of income certainty and flexibility in retirement and advancements in retirement income solutions, and how they are used in combination, is key.”

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