Retirement investment solution providers should “seize the day” amid rising asset levels that are providing opportunities for innovation, according to a report from NextWealth.

NextWealth stated that assets in retirement investment solutions were on the cusp of a significant growth spurt.

With the first cohort of ‘pension freedom’ retirees reaching 75, there is a growing imperative for innovation, which has been dominated by Royal London’s Governed Retirement Income Portfolios (GRIP), the firm said.

If GRIPs were removed, the assets held in solutions designed for pension decumulation sit at a little over £1bn, a “tiny fraction” of the advised defined contribution (DC) retirement market.

NextWealth’s findings showed that, as more clients move from accumulation to decumulation and regulation supports the need for sustainable income planning, there was space for providers to define this emerging sector.

“Those who offer simple, competitively priced multi-asset solutions or MPS ranges – aligned to risk profiles, easy to implement across wrappers, and backed by strong adviser service – are well placed to capture assets as advisers modernise their retirement propositions,” said NextWealth managing director, Heather Hopkins.

The report also noted that advisers were looking for solutions that provide flexibility and evolution capabilities in recognition of retirement being a transition rather than moment in time.

“Advisers and clients don’t simply ‘buy’ a multi-asset fund or a model portfolio; they hire it to do a job – to deliver sustainable income, manage sequencing risk or volatility, free the adviser’s time or give clients confidence in their retirement spending,” Hopkins said.

“Defining that job is key to designing solutions that meet advisers’ needs for flexibility, enabling them to best support client through several life stages in retirement.”

NextWealth argued that the narrative needed to be reframed away from pot size to focus on the service the investment solution has been designed to provide.

Product providers were taking different approaches to supporting the various tasks that need to be done, the report noted, with some offering an end-to-end solution, while others were looking to do one job.

Hopkins said it was of paramount importance that providers consider how their solution will be blended with others.

“Providers need to think about the adviser workflow to understand how this will tie into risk profiling, cashflow modelling, platform choice, reporting, etc,” she continued.

“They need to think about how secure income might be blended with growth portfolios and how that will shift over time as the client passes through various life stages.

“The job that clients will hire investment solutions to do may change through retirement. And this need for flexibility alongside certainty came through in our adviser survey and provider interviews. The most important feature of income generating products, according to advisers, is flexibility to adjust income withdrawals.

“We know that providers are optimistic about future growth. The market today may still be nascent 10 years after the introduction of pension freedoms, but it is finally primed for expansion.

“For providers willing to invest in flexibility, platform reach and clear adviser support, retirement investment solutions represent a meaningful growth opportunity in the next decade.”

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