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Drawdown advice charges are too high, report says

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Drawdown advice charges are too high, report says

Most advisers are charging clients in drawdown too much for ongoing advice, according to a study conducted by CWC Research and the Lang Cat and sponsored by FE. 

The consultancy firms said 75% of advisers have the same proposition for accumulation and decumulation.

Clive Waller (pictured), managing director of CWC Research, said this posed a particular problem when looking at how much advisers' clients paid for relatively simple advice

'In decumulation the ongoing charge of 100 basis points (bps) is too high. We found 60% of adviser clients are in the retirement area.

‘This is something the regulator has got to address. Advisers where they are advising and providing financial planning on complex things IHT, trusts etc that is fine. But if they are at annuity replacement, and we know most of this stuff is annuity replacement, the cost has got to come down.'

Mark Polson, principal of The Lang Cat, pointed out findings that showed it was not only the fees but the solutions being offered that advisers were not changing sufficiently for clients at retirement.

‘What knocks me out is there is relatively little appetite from firms to change their centralised investment proposition from pre-retirement to post-retirement.

‘And there is also relatively little appetite to see the fee model changing from pre-retirement to post-retirement,’ he said.  

Waller suggested there are cheaper alternatives for decumulation clients.

‘We think there is a huge opportunity there for providers to provide something which is “buy and forget”. Buy a package like you buy an annuity and it runs itself, unless something happens, and there is no need for 100 bps ongoing charge,’ Waller suggested.

The findings of the research are published in the joint report Never Mind the Quality, Feel the Width 3.

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