1. Adviser Business Insights: Part 2
The Decumulation Dilemma
Wave 2 [May 2012]
What it takes to succeed ‘at retirement’ – who’s winning and why.

2. Foreword With all best wishes for your success. Tony Wickenden
The negative effects of quantitative easing, upcoming Europe-wide regulation under Solvency II and the introduction of unisex annuity rates in December will all constrain future annuity rate rises. With nearly 60% of advisers’ client banks aged over 55 and with longevity increasing the implications for advisers, providers and platforms operating in the ‘At Retirement” space are significant.
These drivers, feeding vicariously off of the volatility and uncertainty that represent our ‘new normal’, create a fairly unprecedented maelstrom. This is especially so when we also take into account the increasing fluidity of consumer lives (and objectives). The strong implication is that risk is becoming far more subjective. In this respect, financial planning is (or should be) far less linear: Market risk, health risk and longevity risk are areas advisers believe are critical in and to their retirement strategy considerations, yet they also believe these are areas in which they are currently under-served.
The answer from providers has been a volley of innovations incorporating third way products, fixed term alternatives and the growing establishment of enhanced solutions. But how do advisers see their relevance to their increasingly
wealthier core market whose retirement income strategies cover a wider spectrum of needs from estate planning to long term care? Have we seen the end of single product solutions for this demographic and how are advisers’ planning processes evolving to reflect, and serve, increasingly sophisticated (and complex) requirements while still offsetting unacceptable levels of risk..
This report sets out to get to the heart of the decumulation dilemma, join the emerging strands of the debate and in doing so, point clearly to where providers, platforms and advisers can truly add value in what has become a hugely important market.
We very much look forward to exploring the very real opportunities with you and your business in the near future.
With all best wishes for your success.
Tony Wickenden
Jt .Managing Director
Technical Connection limited
Phil Wickenden
Managing Director
So Here’s The Plan limited e: m: e: m:

3. Objectives 3
In every edition of our Adviser Business Insights (“TCABI”) we address, in detail ,a specific market/business opportunity and exploring how advisers and providers can work more collaboratively to better exploit them:
This edition we have focussed on...
The “At retirement “ market: the decumulation dilemma
What it takes to succeed “At Retirement” – Who’s winning and who’s losing and why in a market that is critical to many advisers
The aim of this part of the TC ABI is to secure and present the essential information and insight that can positively contribute towards the development of what advisers will truly value in relation to:
Product and proposition
Client- facing/business- generation/disturbance materials and support
Training and education to maximise business generation opportunities 3 3

4. Methodology 4
100 advisers were randomly sampled from a robust panel of 800 Technical Connection adviser clients.
The sample comprised advisers who are:
Nationally representative sample of nationals, networks, regionals and single outlet firms
Substantially PFS/IFP members
& QCF 4 qualified (minimum)
From fee charging businesses
Active in the retirement markets we are focusing on.
All interviews were conducted by telephone or face to face, lasting between minutes
Interviews were conducted during Q2 2012
Participating advisers were offered access to online client facing material from Technical Connection in return for their participation.
Individual anonymity agreed. 4 4

5. Contents Section 1: Adviser business focus
3.0 Detailed analysis by market
3.0 Perceived distinction between products
3.1 Conventional annuities
3.1.1 Level of provider / platform use
3.1.2 Who’s standing out – spontaneous recall
3.1.3 What’s driving good
3.2 Investment linked annuities
3.2.1 Level of provider / platform use
3.2.2 Who’s standing out – spontaneous recall
3.2.3 What’s driving good
3.3 Enhanced / impaired annuities
3.3.1 Level of provider / platform use
3.3.2 Who’s standing out – spontaneous recall
3.3.3 What’s driving good
3.4 Third Way annuities
3.4.1 Level of provider / platform use
3.4.2 Who’s standing out – spontaneous recall
3.4.3 What’s driving good
3.5 Fixed term annuities
3.5.1 Level of provider / platform use
3.5.2 Who’s standing out – spontaneous recall
3.5.3 What’s driving good
3.6 Capped / flexible drawdown
3.6.1 Level of provider / platform use
3.6.2 Who’s standing out – spontaneous recall 5
Section 1: Adviser business focus
Section 3: Provider performance
3.6.3 What’s driving good
3.7 Implications and opportunities
4.1 The importance of support
4.1 What matters most ‘at retirement’
4.2 Key differences by adviser business type
4.3 Who stands out in each area and why
4.2 OMOs
4.2.1 Who stands out for service & why
4.3 Annuity illustrations
4.3.1 Who stands out for service & why
4.4 Payment of transfer values
4.4.1 Who stands out for service & why
4.5 Drawdown illustrations
4.5.1 Who stands out for service & why
4.6 Annual Drawdown reviews
4.6.1 Who stands out for service & why
4.7 Access to online valuations
4.7.1 Who stands out for service & why
4.8 Key developments
4.8.1 Technology and tools ‘at retirement’
4.8.2 Assessing risk
4.8.3 What providers & platforms must do better
4.9 Final thoughts – implications & opportunities
1.0 At retirement market activity
1.1 Adviser client profile – age bands
1.2 Adviser client profile – by pensions & total assets
1.3 Pensions assets held by adviser business type
1.4 Time spent advising on retirement solutions
1.5 Retirement solutions used (when pensions vested)
1.6 Key changes in the last 12 months
1.6.1 Drivers of change
1.7 Expected change over the next 3 years
1.7.1 What will contribute to these changes?
1.8 Implications and opportunities
2.0 Advisory approach to retirement planning
2.1 How advisers are changing their approach
2.2 The consideration of all assets
2.3 The importance of platforms
2.4 Estate planning in retirement strategy
2.5 Reviewing performance
2.5.1 Regularity and what reviews comprise
2.6 Blended solution – emerging trends
2.6.1 The level of take up / expected use
2.6.2 Drivers of use
2.6.3 Best providers of blended solutions
2.7 Implications and opportunities
Section 4: Support imperatives
Section 2: The planning process

6. Section 1.
Adviser business focus

7. Section 1: “At retirement “ market activity7
Adviser business focus
The planning process
Provider performance
Support imperatives 1 2 3 4
Advisers are actively advising on retirement planning for over 90% of their client base as an essential part of their holistic financial planning models.
Over the last 12 months, roughly a quarter of advisers’ clients have used drawdown (26.72%), a quarter have used investment linked annuities (26.26%) and just under a quarter have used conventional annuities (24.72%).
In the face of suppressed annuity rates, the last year has seen a significant shift towards use of enhanced / impaired products as well as drawdown.
Going forward, advisers expect drawdown (flexible and capped) to continue to be more relevant to a larger proportion of (wealthier) clients, though there is also the expectation of growth for alternatives such as third way products and fixed term annuities.
Investment linked annuities will also continue to play a significant role as conventional annuities are used increasingly for only advisers’ lowest (certainly under £100k) client tiers (who’s service agreements are far less extensive and more reactive).

8. Adviser client profile8
Q: What is the age profile of your clients and what % do you advise on retirement planning?
Advisers have the largest proportion of their client bank in the age range (30.5%) with well over half (58.7%) over 55 in total.
46-55 year olds represent nearly a quarter of advisers’ clients (23.9%) while just 17.4% are under 45.
The proportion of clients (in each age bracket) advisers are advising on retirement unsurprisingly rises with age, though advisers are increasingly taking a holistic view to all financial planning and expect these numbers to increase still further.
Currently advisers are advising on retirement for 80% of under 45s; 94% of 46-55s; 98% 56-65s and 99% of those older.
Q: Do you see the % increasing or decreasing?
Decreasing (40%)
Increasing (60%)
Of the small proportion of advisers not yet advising 100% holistically, the majority expect an increase in retirement planning engagement going forwards.
The only exceptions (and they were a very small minority) Voiced concerns about: “
Unfortunately it's gone down as they just don't see the value. They're focussed more on buy to let
If anything it's decreasing. A lot of people in company pensions schemes are not seeking advice from us. “ “
Every client we deal with across the board. It's absolutely key to what we do. “ “ “
Disengagement from people in company pensions schemes
Lack of perceived value in pensions and preference for BTL 8 8

9. Assets under management9
Q. What proportion of your clients have total / pensions assets in the following ranges?
In terms of total assets, 36% of advisers’ clients have assets over £500k, with 36% sitting between £ k
Looking at pensions assets only, 73% are under £500k, with 34.1% of clients having pensions assets under £100k.
There are, however, some significant differences in assets held by clients belonging to advisory groups.
For instance, both National IFAs and single outlet businesses have far higher proportions of clients with pensions assets over £1m.
Regional IFA businesses have a far high proportion of clients with both total and pensions assets in the £500k-£1m bracket. 9 9

10. 10 Client pensions assets – by IFA type Nationals Networks Regionals
Q. What proportion of your clients have pensions assets in the following ranges?
Nationals
Networks
Regionals
Single outlet
National IFAs have the highest proportion of clients with pension assets over £1m (17.67%).
They also have a lower proportion of client s under £100k (42.5%).
Over two thirds of network members’ clients have pensions assets under £100k.
Only 12% of their client base has pensions assets over £500.
Of the regional advisors we interviewed, all of their clients sat in the £100k-£1m bands.
Half have pensions assets of £100k-£500k and half have pensions assets £500k-£1m..
Single outlet business have the second smallest % of clients with pensions assets under £100k.
While nearly half lie in the £100-£500k band, 30% are over the £500k mark.
% clients with pensions assets 10 10

11. Time spent advising on... 11
While overall, personal pensions take up approaching half of time advisers spend on pension planning, there are key variances by adviser firm type:
Average Assets under management from the sample we spoke to was £108m.
The median AuM value was £26m.
Six advisory businesses we interviewed have over £200m under management.
Regionals are spending a considerable amount more time on pensions transfers than any other area
Group sipps are understandably more the domain of national IFAs (12%)
Single outlet businesses are for more SIPP active (30% time)
Network members stick far more to PPs (72.5%)
Of time spent advising on pensions, advisers are spending the greatest proportion on personal pensions (42.68%).
Sipps take up a further 25.75%.
Group schemes represent only 10.36% of time spent.
Pensions transfers comprise 8.18% of the time spent on pension planning.
Q. For clients with pensions assets (who are yet to retire) how much of your time (as a %) is spent advising on...

12. Conventional annuities
Solutions used when pensions vested 12
National
Regional
Network member
Single outlet
Conventional annuities
24.72%’
Enhanced
15.6%
Enhanced
15.76%
3rd Way
3.11%
Fixed term
1.43%
Investment linked
WP annuities
1.64%
26.26%
Sphere size represents % of all adviser clients that have used various retirement solutions
Sphere placement indicates use of solutions by advisory business type
Drawdown was the only product that had consistent penetration across advisers groups. Elsewhere there was significant variance:
Q: For clients who have vested their pensions, what % have used...
While network members were the highest users of drawdown (37%), use was consistent across advisor groups.
Conventional annuity use was highest with regional IFAs (46%) and nationals (39%).
Investment linked annuities are used consistently with regional IFAs significantly above average.
3rd Way penetration was particularly low, with only networks (9%) bucking the trend. 12 12