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The Insider guide to drawdown
In association with BlackRock

Interview with Helena Wardle, Smith and Wardle

Helena began working at Nationwide in 2006 and decided early on that she wanted to become a financial adviser. Helena qualified as a financial adviser in 2011 and has been helping support clients ever since. Helena very much values learning and loves the challenge of getting to grips with complex and technical concepts, which is what led her to become a Chartered Financial Planner. She took on a different challenge in 2018 and completed her MSc in Financial Planning. It was by far her most valuable learning experience; improving her objectivity, understanding of people, and her interest in academic reading and research.

Which questions do you use with clients when starting the conversation about retirement?

We focus a lot of our questioning around what’s important to people, their values, needs and priorities.

We try to highlight the different journeys in retirement. For example, ’You’ve built up all this money, you’ve always seen growth, even when markets fall, because you’re saving into your pot. What happens now, if you start taking it out, and you see markets fall?’

We really try to bring the risk piece to life because standard risk questionnaires, in my view, don’t do that very well.

We ask them about what matters. What do they see life looking like? What things do they think will keep them up at night? What will really worry them if they will worry at all? Is there anything they think will throw a curveball into their plan? What would offer you reassurance, and what can I do to help build that into your long-term plan?

We also try to understand their personal circumstances, how much family matters, why are they doing this? What does money mean to them?

It’s important to remind clients this isn’t something they have to stick to rigidly. Otherwise, if you create this great plan and something goes wrong, they panic. But if you paint the picture as long as they’re heading in the right direction and have agility in that, it helps.

I always talk about Plan B; what do we do when things go wrong? And we set up a strategy for that.

It’s important to remind clients this isn’t something they have to stick to rigidly. Otherwise, if you create this great plan and something goes wrong, they panic. But if you paint the picture as long as they’re heading in the right direction and have agility in that, it helps.”

Are there any typical questions you get asked by clients, or indeed any unusual or tricky ones?

People worry about not living long enough, and what happens to the pot.

They worry about inflation at the moment, because it’s in the press, which I think is a positive. Before, when it was only 2.5%, people didn’t really think of inflation as a risk. And because we’ve had a low inflation environment for so long, having it back on the table is quite important.

I think people struggle with the mechanics of drawdown. I get a lot of questions around how it actually works. Because there are so many terms; people don’t get ‘crystallised’ and ‘uncrystallised’. I think a lot of the terminology providers use is terrible. And people really struggle to understand how it works until it gets in motion. People have a lot of misconceptions.

As well as those practical things, people worry about their health, they are thinking about having to put LPAs in place because of worries about their mental capacity, worried about losing partners and how that impacts them.

They’re starting to ask more, ‘how do I help my kids? If I’m not here, how do I make life easier for them?’ It’s definitely not just about returns and making money; it’s about not being a nuisance on their kids while still wanting their independence. There’s so much more to it than just what’s in their pension.

They’re starting to ask more, ‘how do I help my kids? If I’m not here, how do I make life easier for them?’ It’s definitely not just about returns and making money; it’s about not being a nuisance on their kids while still wanting their independence. There’s so much more to it than just what’s in their pension.

What is a realistic and safe withdrawal figure?

We create a client’s personalised sustainable withdrawal strategy, using Timelineapp, based on a number of factors that will vary from person to person, such as the level of risk they are willing and able to accept, how long their income will be needed, their previous investment knowledge and experience.

I actually buy some of our clients Abraham’s book [Abraham Okusanya, founder and CEO of Timeline], ‘Beyond the 4% Rule: The science of retirement portfolios that last a lifetime’, because some people are very focused on that number, which I don’t agree with as appropriate for everyone.

It’s normally very detail-oriented people that ever ask about it. A few clients may have researched it a bit more and think about longevity and making their money last and they would come across concepts like the 4% rule because people do research retirement. I think it’s rare to sit in front of a client who hasn’t at least Googled their retirement problem, which means you have to almost debunk what they’ve read to an extent before you can help them along the right way.

But that’s a very specific type of client. For the general client, no, we don’t talk about that specifically. They just want to know, ‘have I got enough and if not, what do I need to do?’

How do you tackle the conversation about life expectancy?

I try to make light of it. I always joke about difficult topics because it makes it more normal, more human. When I talk about planning for them to live to 100, I’ll say, ‘I expect you to be like Captain Tom, going around your house on a Zimmer frame’. I have found YouTube clips of 100-year-olds running races or 96-year-olds who still practise Tai Chi. I paint the picture that life’s not over until it’s over, and try to bring a bit of humour into it.

I don’t tend to get much pushback because I explain why we do it, explain the unknown factors and that we’re much better off with a more robust and cautious approach that factors in that you might live to over 100. If you put it across in a way that helps them understand your logic, I find people don’t push back. I almost lay down the law; I’m not budging unless there’s a really good reason to.

Obviously if someone has a life-limiting illness for instance, that would come into the plan, but that is not something I assess as an adviser. That’s something they and their doctors assess, feed into me, so I can factor it in.

But sadly, I think that a lot of people who are overspending on their pensions are not sitting in front of advisers and that’s a concern. We help keep our clients on track so they are more reassured that they will have enough.

How do you assess attitude to risk and capacity for loss for clients in decumulation?

I feel quite strongly that capacity for loss is the adviser’s job not for the client to assess. I don’t think clients understand capacity for loss sufficiently, so it’s my view that it needs professional assessment. I liken it to a GP assessing and then diagnosing, which is not something I put on my clients.

It’s not just about their attitude to risk in drawdown as there are specific risks in retirement. I ask all the questions to understand their situation, then take all the hard facts, apply our processes, use our cashflow tools, take the assumptions and factors we use to build the picture, the way we structure our process… all that, to me, will show us their capacity for loss.

We’re assessing that client’s situation and what’s best for them. We have a very strict process because our team’s growing, we work on the basis that we want advisers to speak to clients, and the team builds a lot of the stuff in the background, which builds in a lot of objectivity. Because it follows a process, a plan, a philosophy and how to evidence that was the right thing to do

I feel quite strongly that capacity for loss is the adviser’s job not the client’s job. I don’t think clients understand capacity for loss sufficiently, so it’s my view that it needs professional assessment. I liken it to a GP assessing and then diagnosing, which is not something I put on my clients. ”

How do you describe and discuss the issue of income sustainability with clients considering drawdown?

We definitely use cashflow for that; we use CashCalc and Timeline. We paint the picture for the client to give them an understanding of whether we think they’re drawing a level that is reasonable. This is what I see as the biggest flaw of the 3% or 4%, whichever one you want to take – 4% is inaccurate for the UK anyway – because what I find is that they forget the step-up and step changes of people’s lives.

People often spend more in the beginning, then it drops down and they start spending less as they get older, because they do less. It may then increase again if they need care or additional support. And when you tell people to spend more, they don’t always do that. We have noticed that many clients don’t increase their drawdown each year. This might change now as cost of living changes are more noticeable.

What cashflow does brilliantly is paint a visual picture based on what we think or understand they want their life to look like, which forms the discussion basis for how much income they will need.

I think we’re very good at dismissing annuities and we shouldn’t. Longevity is an issue and some people will run out of money, so an annuity might be the best thing for them especially if they can’t afford to take the risk. Press-wise, annuities have had a really bad reputation. Sometimes clients are adamant they don’t want them even when their risk appetite dictates that they should have them. I challenge on that quite a lot because when they tell me what they need, often what they’re describing is an annuity. When you explain it to people in a way that they understand what it does, without calling an annuity, people like it.

Which investment strategy or strategies do you typically recommend for clients in drawdown?

We keep things really boring because I think the investment strategy is the least of their worries. As long as it’s low cost, is in line with their attitude to risk, diversify their money and does the job, that’s what matters in our view.

We use very well-thought-through solutions, but I don’t spend a huge amount of time on that with the client unless it is important to them. I explain that is the job of the fund and the fund manager and we pick the right one for them, but I don’t tie myself and my advice to that to a huge extent; it’s just a way for them to get to where they want to be.

Our clients are quite average, normal people. So low-cost, multi-asset passive works perfectly well for them. They don’t need anything complicated. Half the time, if you try to put them into something complicated, they don’t really understand it anyway and you’re just adding extra costs that we don’t see add massive value.

To what extent do you talk about ESG with drawdown clients?

I think it’s becoming more prominent and people care about it. It’s our job to educate people on what’s available, so we keep the question very open when we ask people about their values. When we try to really understand what matters to clients, sometimes you won’t hear about ESG, you’ll hear about other things that are important such as clients worrying about volatility, so we will need to look at risk-managed strategies or talk about investment composure.

We keep it really loose about what things matter, but we’re looking into how we’re asking clients around that because I think it’s really important to not lead, but just inform, which is a very difficult thing to do. It’s important for people to know what’s available but I can’t push my views on the client.

You have to be careful with any recommendations in the ESG space; you can tie yourself up in knots and I know this has been a massive discussion point.

How often do you review clients in decumulation?

We definitely review annually but at the beginning, when people first start drawdown, we see them a little bit more, just to help them settle into the changes and if they’re okay with income, touching base a little bit more. But we always just ask our clients. They’ll always have an annual review if they pay for the annual review service, where we tell them the reason for having that is to explain if we’ve been revisiting the plan, talking about what’s changed and how we are keeping things on track.

But they also know they can touch base if things change throughout the year. I do wonder if this will change more, because if you think about the last couple of years, the touchpoints are probably more frequent with some clients than others. I think experience matters as well; more inexperienced clients – always on their investments – will need more of your time.

Typically, most people don’t pay attention to their pensions until they feel they have to. We know that only 24% of people read their pension statements, which means they then get to retirement and then have to pay attention to their pension. So even though they’ve technically been long-term investors, they are actually very inexperienced with investing and sometimes you have to just reassure them over little wobbles, remind them we modelled for things being way worse. You have to have to hold their hands a little bit more.

How do you stress-test the plan?

Again, it comes back to how we use cashflow, as some people will be very scared by what they see. And I think that’s a good thing because it makes them realise it could happen. So, we use Timeline because it goes back over 100 years. We use their historical forecasting, running hundreds of simulations, so it gives people a percentage of the likelihood of meeting their objectives. We use that because I find it’s quite good and gives them a really good visual that you can actually see, it shows the probability of success and we find this is a great discussion point to help them think about adjusting if they need to; you get people to start thinking that things may not always go their way.

I also really bring sequence risk to life for people; there is so much that is out of our control and we may turn towards Plan B. It helps people understand these risks better.

Further reading

Interview with Duncan Chance

Interview with Wayne Tandy

Interview with Peter Savage

Interview with Stewart Bicknall