What’s wrong with Centralised Retirement Propositions?

A lack of innovation by the industry is the vital ingredient missing for Centralised Retirement Propositions (CRPs) today. How can we expect advisers to develop a robust, repeatable, flexible, and engaging CRP if they do not have the tools to do so?

Putting together a CRP is like putting together a puzzle; how do you make all of the pieces fit to provide an ultimate solution for your clients?

As an industry, it’s our job to provide advisers with these pieces in order to solve the retirement puzzle for each and every client, something which we simply haven’t done.

The CRP gained a lot of traction post-Pension Freedoms as advisers and clients were given the freedom to move away from a sole solution of an annuity to a much more flexible approach to income drawdown. But it’s difficult to define what they truly look like across the market in practice. In fact, according to our latest research, even the four-fifths of adviser firms that run CRPs aren’t all that satisfied with what they’ve created.

Our research with cicero/amo* found only 18% of firms that have a CRP in place say they’re ‘very satisfied’ with the proposition they run, suggesting many haven’t found their ideal solution in the past seven years. To back that up, three-in-five (59%) firms agree there’s a need for more robust and centralised retirement income planning processes.

To be blunt, we as an industry have let advisers and their clients down with our lack of innovation.

The term CIP has been with us for many years and in simple terms it is the range of investments that a client may be advised on. A CRP is newer term for our industry, and one that we see as a framework. A framework that is much wider than simply the investment strategy for a client.

The CRP framework needs to take into consideration and provide a framework to address all the risks that a client and adviser need to discuss when retirement planning, including investment risk, longevity risk, savings risk and inflation risk to name just a few.

It is critical that a CRP framework provides a range of robust, flexible and engaging options for a client and adviser to work with when devising, implementing, reviewing and updating a client’s retirement income plan.

Fascinatingly in our research we found a disconnect between the investment proposition and the CRP. Just three-in-five (58%) advice firms said their CRP included an investment philosophy, begging the question what end product the other 42% actually deliver.

Due to a lack of industry innovation CRPs have been made to largely incorporate drawdown as the portfolio’s sole source of income.

But that’s changing. And advisers need to consider what options there are beyond remaining invested and seeking to achieve the magic 4%. This is where we think our suite of products come in to offer an all-round solution for modern CRPs. On our platform you can use our Retirement Income Solution (RIS), based around the classic bucketing approach but developed further to achieve a flexible yet sustainable income drawdown for retirement. We have taken this one step further and widened the investment solutions available within RIS as we have worked with RBC Brewin Dolphin and EQ Investors to incorporate their own MPS offerings as an option within RIS.

On our platform, there’s also the Secure Lifetime Income from Just, which offers a stream of guaranteed monthly payments for a client’s lifetime. These payments are paid into the SIPP and can be taken as tax-efficient income or reinvested at a later date. Plus, there’s a cash-in option if circumstances change.

At 7IM we are passionate about delivering innovative solutions for clients in and at retirement. But we also know that to truly deliver flexibility we cannot do this alone, hence why we are getting it together with industry partners so that we deliver choice and flexibility together.

If you’re interested in finding out more about 7IM's Retirement Research Study or our retirement offering, including the new Retirement Income Solution available on the 7IM Platform, click here.