A New Drawdown Proposition

Although one can welcome new propositions and understand the case for a new wave of guaranteed drawdown products, it remains to be seen whether advisers will be keen on them.

 

Independent consultant Malcolm Kerr says: “The market needs new propositions to meet the needs of consumers in drawdown. This [Novia and Just] solution sounds interesting and it is good to see that it works on a platform. That has been a serious challenge in the past for some innovative solutions.”

 

But Kerr adds that his past experience makes him sceptical about whether propositions such as this will catch on.He says:

 

“Based on the work I have done in this space over the years and a session I ran on the topic at last year’s Money Marketing Retirement Summit, my guess is that Novia and Just might struggle to gain traction. At the summit, a common response from the audience was ‘we don’t need any more propositions.

 

“When asked why innovative propositions had not taken off, actual responses included ‘too expensive’, ‘I don’t have the time to look at these things’, ‘I can create portfolios that mitigate these risks’ and, I quote, ‘too complicated’.

“This last response was a bit of a surprise given the huge flows of client money into GARS and PruFund, which seem to me to be very complex products indeed.

 

“At the start of the session, I asked the audience to decipher some acronyms. All the hands went up for the first question, which was the letters ‘RDR’. One hand went up for the last question, which was about CPPI – constant proportion portfolio insurance [a mechanism to underpin guaranteed drawdown].”