Lee Smythe of Smythe & Walter uses risk-targeted multi-asset funds in personal pensions and offers a bespoke approach through DFMs for those who require it.
Managing director, Smythe & Walter Chartered Financial Planners
We do the large proportion of our work in the retirement space and increasingly find clients want to simplify their planning and understand more what it will provide for them.
Our process involves working with clients firstly to understand what they will need in retirement and when that might be; secondly to help them understand what they already have in place; and finally to see how best to bridge the gap.
Our main focus is understanding the return required and how this relates to the client’s attitude to risk, which we establish using a combination of profiling tools and in-depth discussion. We seek to deliver this return using low-cost wrappers and our preferred investment solutions.
The key is then to keep the plan under review, and adjust and adapt it in line with the client’s changing circumstances and requirements, especially as they start to reach the final stages of accumulation and work toward commencing decumulation.
This transition is a key stage in the client’s financial life and it is essential to be able to make the right decisions from an informed position. We therefore work closely with them to understand their whole financial position and how each aspect interacts.
What’s in your wrapper?
We use mainly risk-targeted multi-asset funds so clients get what they expect following our risk assessment process and agreed approach. We keep the funds under review to ensure they continue to deliver what our clients need. Some clients who require a more bespoke approach are introduced to a discretionary fund manager. Others use our core approach alongside their own selections of specific holdings if they have a preference in specific areas.
Retirement planning tips
Agree a target income and aim the plan at this.
Ensure the investments remain within the agreed risk tolerance.
Use the right wrapper; one size doesn’t fit all.
Target the required return in the lowest risk way.
- Start discussing decumulation with clients well in advance.
My favourite client case
A final salary scheme member who was over the lifetime allowance (LTA) wanted to look at his options, believing the best course would be to accrue a higher pension and pay the tax. He hadn’t accounted for the future LTA reduction and, after we ran a variety of scenarios, we established that the best course was to take benefits and return to work on a new contract. His employer was happy to do that as it reduced its pension funding costs.
Post-retirement, those in receipt of pension benefits or taking income from investments represent 30% of our client base. Of those, around 40% are in drawdown pensions, most have money in ISAs and some hold bonds. We find decumulation is linked closely to inheritance tax planning and those with a good level of secure income are more able to pass other assets to the next generation.