To summarise: render unto Caesar that which is Caesar’s. Let portfolio management be its own practice, and let financial planning be its own, too. It’s where the two meet in the same firm that life is going to become trickier.
Can I have my money back?
My third and, you’ll be relieved to know, final theme is that of clients starting to draw income from their accumulated savings. Note I’m not using the word ‘drawdown’ here, as we all know income isn’t just about pension pots.
We’ll see two things this year. First, and most importantly, centralised retirement propositions will come of age. We’ve been thinking of these incorrectly for a long time. Many providers are rushing to create income-optimised portfolios (which might be OK) or different-for-the-sake-of-it tweaks on existing accumulation portfolios (probably not so OK).
This is the wrong thing to do. Most companies – about 70 per cent – keep their clients in existing portfolios as they head into the income phase, and simply sell down into cash. This isn’t the answer either, but the truth is that if a client is a risk five and maintains that risk rating in retirement, then there’s not much point in messing around with the investment portfolio itself.
What needs to change is the way money moves around inside platforms and products – even a basic three-pot strategy is hard to run on most platforms. Most products only let you hold one portfolio per tax wrapper; something which is entirely silly in this context.
If retirement income construction is to be truly holistic, then client risk modelling needs to happen across wrappers, and it’s highly likely that more than one portfolio will be required in each wrapper. Income has to flow down through the time horizons, and be captured ready to pay out to clients in a structured manner. The provider market currently leaves far too much of this to advisers to organise, but we’ll start to see that shift.
I think the leader in this space right now is Seven Investment Management, but others will start to catch up soon. Again, it’s not that portfolios are wrong; it’s just that they’re not enough.
Finally, here are a few companies to watch in 2019:
- Seccl – the first new-generation ‘adviser-as-platform’ proposition will get going in earnest.
- Embark – the business has been busy with Sipp acquisitions and white label deals and has ignored the platform a bit; this is going to change and that 0.15 per cent price point is super aggressive.
- Advicefront – already delivering excellent sign-up experiences, we should see much more from this fintech firm in 2019.
- eVestor – one of the very few robos that actually gives advice; eVestor (and its sister, Open Money) will make the most of its uSwitch partnership and give holistic advice that isn’t all about pensions and investments.
And that’s it. We’ll see how we do. I don’t know about you, but I’m really looking forward to it.
