The transition to retirement

    The illuminate debate – part two

    The panel

    Amyr Rocha-Lima

    Partner, Holland Hahn & Wills

    Nick Platt

    Managing director, Henwood Court Financial Planning

    Sarah Luheshi

    Deputy director,
    Pensions Policy Institute

    Neil Bage

    Founder and director,

    Fiona Tait

    Technical director,
    Intelligent Pensions

    Natalie Holt

    Content editor, Nucleus Financial

    Interpreting the cashflow

    Holland Hahn & Wills partner Amyr Rocha-Lima made the point that clients will contact a financial planner when there’s a particular trigger point for them to do so. This might be a point in their life, or a realisation that they don’t have a clear picture on whether or not they can retire.

    But Amyr argued there was a further challenge. He said clients need to understand the financial plan, but also the cashflow modelling on which it has been built.

    He said: “The problem is sometimes a cashflow plan is delivered via sophisticated financial planning software, but without helping the client interpret the results.

    “For example, some financial planners are now helping clients to understand their retirement plans by giving them a probability of success and a probability of failure. But let’s say that given a client’s amount of money and the withdrawals they want to take, the probability of the plan’s success comes out at 90 per cent. What does that mean? You’re asking the client to think about how scared they are of a 10 per cent chance of failure.”

    Amyr believes that is doing the client a disservice, and that planners need to go further in explaining what these probabilities mean.

    He added: “In this example, 10 per cent failure doesn’t actually mean clients will run out of money and end up living on the streets. It means there’s a 10 per cent chance that within their retirement journey they will have to make some adjustments to the plan.

    “I think that’s when we give clients confidence to be able to make an informed decision about the lifestyle they want to achieve and maintain for themselves and their loved ones.”

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    The problem with pensions

    As well as the transition into retirement, planners and clients also need to consider that retirement isn't one solid period, but is itself broken down into stages.

    This idea of a ‘multi-stage retirement’ is one that the Pensions Policy Institute (PPI) is actively researching at the moment.
    Deputy director Sarah Luheshi said: “We looked at those in retirement and what we identified was there are three phases. We’ve had some interesting discussions about the naming of these phases, so forgive me if it offends anybody.

    “The first one is independent. This is the first phase you’d hope to go into retirement where you’re in good health, you can live the ‘white linen’ lifestyle on the beach, travel, or whatever it happens to be.”

    The PPI has found that this stage roughly happens for about 50 per cent of people. People may then move into a ‘decline’ phase in older age, and then a ‘dependent’ phase where they need more care and support.
    Amyr said he recently received a card from a couple he had been working with which jokingly summed up the life stages as: “Lager, Aga, Saga and gaga.”

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    Usain Bolt, and coaching in retirement

    Planners have to navigate clients’ different expectations of retirement, and read between the lines of what clients are telling them.

    Be-IQ founder and director Neil Bage said coaching clients and understanding their behaviour can help towards making a retirement a success.

    He said: “Let’s step out of financial services and look at Usain Bolt as an example. At some point, either he was talent-spotted or he decided he wanted to be the fastest man on earth. He works with a coach. That person isn’t there to teach him how to run, but to fine-tune his abilities and keep him on track.

    “Typically, in financial services there can be a tendency to give people a plan, but not coach them. We don’t tweak – not necessarily the plan, but we don’t tweak their behaviour.”

    Neil said by understanding more about clients’ behaviour, planners are well-placed to pick up on warning signs such cognitive decline, or where a husband and wife are at odds over their vision of retirement but haven’t broached this with each other.

    Fiona agreed that coaching in retirement, and challenging clients where necessary, was a key part of the planning conversation.

    Bringing it back to Usain Bolt, she said: “I remember a programme looking at getting him back into the last Olympics.

    At the very start of the whole process, his coach said: ‘We have a problem here – we have a fat athlete.’ But that’s what the coach was there to do. Usain Bolt had been allowed to relax a bit, in the knowledge that he was going to pick up training again when it got into pre-season.

    “That coaching aspect is really important with what we do. You do have to challenge every so often.”
    Nick said at Henwood Court, they call this ‘care-frontation’.

    “That coaching aspect is really important with what we do. You do have to challenge every so often.”
    Nick said at Henwood Court, they call this ‘care-frontation’.

    Could employers do more?

    Panellists also discussed the strategies planners can use to tease out what a good retirement looks like for clients.

    Amyr said he encourages clients to imagine they are six months into retirement on a typical Tuesday afternoon, and asks them: What are you doing?

    A husband might joke that the wife has got a big to-do list for them, but what about when the to-do list is done?
    Amyr said: “If you probe enough, it probably doesn’t take more than two of those kinds of questions for the client to turn around and say: ‘You know what? We haven’t really thought about that yet.’

    “Potentially, you don’t even need to take it any further than that. But you’ve put on the table that’s it’s important for clients to think about what their life is going to look like in retirement. This doesn’t have to be down to the last, minute detail. But we all know that a week of Saturdays sounds good but isn’t the reality after the first few weeks.”

    Nick said increasingly there are more and more ‘never retirees’, where people are always doing something, whether that’s a full-time working week, a phased reduction in working hours or voluntary work.
    He said: “Everyone’s definition of happiness is different, and happiness doesn’t have to be expensive. It can be as simple as walking the dog in the park. But if people can make time to sit down and think before they retire about what they’re going to do, then their chances of having a happy retirement are far greater.”

    A simple exercise Nick does with clients to get them thinking about happiness in retirement is to draw a line down a piece of paper and ask clients to note down their likes and dislikes. From there, clients can start thinking about building a life with more of the things they like, with the ‘dislike’ list either delegated to someone else or removed from their life entirely.

    Sarah believes getting more people on the road to a happy retirement may come down to employers playing a greater role.

    She said: “One of the most successful initiatives policy-wise we have had in the recent decade has been automatic enrolment. We have seen over 10 million new savers entering the pensions world - the trouble is that’s based on inertia.

    “One of our biggest challenges is how do we get people in their early 40s or 50s starting to engage with these types of [retirement] decisions. I wonder what the role of employers should be to educate people on this. It was once quoted to me that about 80 per cent of people work for SMEs. So how we can we enable those SMEs to help their employees start to engage?”

    Neil said that having recently moved house and discovered coastal life, the joy of sitting on a beach watching the sunset as the tide goes out is a feeling you can’t buy, and can’t always readily articulate.

    But he said financial planners can help clients get to a realistic version of retirement, through honest conversations and the kind of questions they ask.

    He said: “That difference between what you’ll think you’ll do and what you do is absolutely crucial. Planners need to reveal what clients will actually do.”

    Fiona agreed questioning clients was important, and echoed a point made by Amyr that financial planners have to “ask the right questions, and then shut up and listen.”

    But she also said that in terms of the advice process itself, there’s more that can be done to make sure the right recommendations are made to get clients to happy, successful retirements.

    She said: “A lot of people, and I include my own firm in this, can from time to time get so focused on recording all the facts and figures. But that means it can be difficult to actively listen to the underlying parts of the conversation. We have to find ways of getting better at that.”

    Fiona cited the example of call recording, which for Intelligent Pensions is about more than complying with Mifid II, but a way of understanding the nuance of a conversation. This allows the firm to pick up on those cues and give advice accordingly.

    She added: “Questioning is really important, but you’ve got to make sure that information is captured somewhere – and used properly.”

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    Attitudes to retirement are changing, as is the notion of retirement itself. Retirement might mean continuing to work in some capacity, or it might mean creating a new, as yet unfulfilled, aspect to your life.

    It might mean volunteering, or working in the community, or having the time and resources to pursue a long-held ambition or life-long interest.

    As with their finances, clients will undoubtedly vary in their attitude and approach to retirement. Some will make a detailed plan as to what retirement looks like, others may be so ready to leave work that they don’t stop to think how they will fill their time.

    Financial planners have a huge role to play in enabling a new kind of life for their clients in retirement. Of course, this will involve getting the finances in place, but the very nature of life planning and helping clients achieve their goals means there’s an impetus for planners to help clients prepare emotionally and psychologically for retirement, as well as financially.

    Retirement requires a certain level of emotion readiness, and building this into planning discussions can make for some very powerful conversations.

    The transition to retirement may well represent a standalone client segment, requiring a different kind of advice process or approach beyond the typical review meetings that establish whether a client’s financial plan is on track or not.

    Ultimately, planners are in the business of helping clients lead happy lives – not just in the run-up to retirement, but beyond. By encouraging clients to think about what a happy retirement looks like for them, and helping them ease themselves into their new stage of life, planners can massively contribute to getting clients to a place where they relish the prospect of retirement, rather than perhaps dreading it.

    A huge thank you to all of our panellists in helping to shape this debate. Let us know if there’s any topics you’d like to see covered in future on Illuminate either online or through our events programme.

    Part one

    Click the button below for part one of the debate.