With our research partners...

1. With our research partners... June 2014

2. Foreword What do the following (and, if they have their way, many specialist annuity providers) have in common ? Lego Apple Marvel Harold Bishop from Neighbours Jesus that nothing is permanent. Companies must evolve in order to remain relevant and profitable. Some, more than others, need a stronger reminder of this, flirting with death before getting their wake-up call. The retirement market has needed a radical overhaul for some time, it’s just no-one expected it to be so utterly inorganic and profoundly non-negotiable. Our extensive interviews with advisers show that things are not as cut and dried as some make out. This report sets out clearly how advisers see the retirement market shaping up and points clearly to what providers and platforms could and should do in order to survive and thrive against a backdrop of unprecedented change. We look forward to exploring the opportunities. …the happy knack of coming back from the dead. Now it might be (is) a tad early for such a grave prognosis of "commercial death" for annuity providers but that hasn’t stopped many commentators. There’s no denying the short term impact of the pensions budget bombshell was immediate, significant and that initial sentiment has translated directly into concerning new business figures as well as share price decimation. …. But then again, with such a major change on the horizon, it's hardly surprising that many will have chosen to defer the decision to commit to an annuity - even one of the new-fangled one year fixed term annuities. Being intellectually justified in "waiting and seeing" will be a very appealing state of affairs for many. There is no greater truth in business than the tenet With all best wishes for your success. Phil Wickenden Managing Director So Here’s The Plan limited Tony Wickenden Jt .Managing Director Technical Connection limited e: phil@soherestheplan.com m: 07966092075 e: tkw@tecconn.demon.co.uk m: 07802584743

3. Objectives We have spoken to 175 of the type of advisers that you want to do business with in order to explore what it takes to succeed “At Retirement” – who’s winning, who's losing and why. The specific aims were:

4. Methodology • 175 advisers were interviewed from a robust panel of 800 Technical Connection adviser clients and over 17,000 advisers from So Here’s The Plan’s growing database. • The sample comprised advisers who were: • All interviews were conducted by telephone, lasting 25-30 minutes on average. • Interviews were conducted during Q1 and Q2 2014. • Participating advisers were offered access to online client facing material from Technical Connection in return for their participation. • Individual anonymity agreed.

5. Respondent Profile (1) Q. How many Registered Individuals are there within the business? Q. Approximately, what are your Assets under Management? • Closely mirroring the profile of advisory businesses in the UK, the majority of the businesses sampled (45.8%) had £0-£20m in AUM while 87.6% had between one and five RI’s. • Over a quarter of the sample (26.5%) have AUM of between £20m and £50m. • A further quarter of the sample (27.7%) have AUM over £50m. • 8.3% of firms interviewed had more than 10 RI’s in the business.

6. Respondent Profile (2) Q. Which of the following best describe your service proposition(s)? • In order to understand more about the businesses consulted we asked them to describe their service proposition. • Incredibly, more than a year into the RDR, 38.8% of firms stated that they had no formally defined service proposition – with this across all size and shape of firm. • Where service propositions were defined, the majority segmented based on AUM (31.6%) or by client preference / behaviour (23.5%). • Interestingly, only 11.2% of firms stated that they only served clients with £100k+ in assets, suggesting that firms are still keen to serve lower net worth clients where possible. • This could, to some degree, explain why such a high proportion of firms are still yet to determine service propositions. WHO ARE THEY? Interestingly, the profile of those without a formally defined service proposition differed little from the overall population, suggesting that firms of all shapes and sizes are still grappling with the issue more than a year on from RDR. • Under £20m (44.8%) • £20m-£50m (35.5%) • £50m+ (20.7%) • 1-5 RI’s (92.1%) • +20 RI’s (7.9%) % respondents

7. Contents • Client profile and retirement planning penetration • Time spent planning across solutions • Solutions used in the last six months • Expected changes Page 8 • Unprompted impact of announcements • Impact on solution selection pre-April 2015 • Impact on solution selection post April 2015 • Detailed impact by clients with varying pot sizes • Implications for product providers across retirement solutions Page 22 • Response to Steve Webb’s annuity switching proposals • Impact (to date) of ABI code of conduct • Improving the regulatory framework • Primary sources of saving post Budget • Expected movement between NISAs and pensions Page 45 • The consideration of all client assets in retirement planning • Outsourcing investment advice • The role of platforms in an ‘across all assets’ income provision strategy? • The importance of all investments in retirement planning • Influencing provider selection • Best providers across all retirement solutions Page 53 • Auto-enrolment • Long term care • Estate planning • Equity release Page 77 • The importance of support (rating of seven key retirement planning supports) • Advisers select the best providers of support in each on the seven areas. • Service delivery benchmark • Technology in retirement planning – what’s valued and who delivers • The importance of risk – and adequacy of tools available Page 88

8. Gut response to budget announcements • There’s no denying the short term impact of the pensions budget bombshell was immediate, significant and that initial sentiment has translated directly into concerning new business figures as well as share price decimation. SAMPLE SLIDES • But then again, with such a major change on the horizon, it's hardly surprising that many will have chosen to defer the decision to commit to an annuity - even one of the new-fangled one year fixed term annuities. Being intellectually justified in "waiting and seeing" will be a very appealing state of affairs for many. • While a not insignificant number expect to see a move away from annuities (especially of the conventional kind) towards greater cash withdrawals and drawdown, it is interesting to note the number who paint a less certain (and certainly less apocalyptic!) picture. • Just under half of advisers (without prompting) responded that either:

9. Gut response to budget announcements Our extensive interviews with advisers show that it’s not as cut and dried as some make out. Asked how the budget announcements will affect how they will be advising their clients who are close to retirement or already retired of advisers (the most common unprompted response) claimed that changes announced in the budget will not have any impact. Though these are gut responses, it is clear that opinion is divided: 19% SAMPLE SLIDES Q. How do the changes announced in the budget affect how you will be advising your clients who are close to retirement or already retired? (unprompted responses)

10. Gut response to budget announcements • In terms of the advice process, many advisers don’t really think much will change, with the consensus being that people should still take advice and if they do they will get the same kind of advice as before. • The only exception is the expected increase in need for tax planning emerging from the anticipated withdrawal of bigger lump sums. “ It won’t really have an affect because the option to retire and take a drawdown type policy was already there. It will make a difference on the tax free cash they can take though. 19% “ advisers • Increased options create more uncertainty and drives many advisers to believe that the impending changes will have a dramatic (and positive) impact on demand for planning. There is a high level of consumer awareness of the headlines but little knowledge. • Longevity is also expected to be a big issue and the need to bridge expected and actual retirement incomes can only be filled with full advice. “ SAMPLE SLIDES Ithink it’s quite a profound change already, in terms of taking into account other options. Clients know about the headlines but not about the implications on that. Such as short-term tax or long term running out of money. 17% “ advisers “ We are in limbo at the moment. The attraction of taking the whole thing in cash has prompted people to hold off the decision. • If there’s any chance that a client may take a significant lump sum most advisers are advocating a ‘hold’ strategy with decisions being deferred. • For these clients, some advisers are recommending drawdown as a stop-gap. “ 17% “ advisers t’s made us have a rethink whether they should annuitise or look at other routes. “ • There remains a good proportion who remain unsure exactly how the changes will impact their business. • For a small number that didn’t already have a license to advise on drawdown, that will now become imperative. • As above, there are more that expect to advise clients to wait until greater clarity is there. “ The choices will be greater. It will help the advice process, people will need to seek more help because there are more options; more dangerous options! “ 11% “ advisers It’s very difficult to say. I’ve just been on the phone to a client now who wants early retirement. I advised to wait until next year. “

11. Short term impact (pre April 2015) Q. In light of the changes, for those considering drawing benefits for the first time before April 2015 what % of them are likely to take? SAMPLE SLIDES “ Put starkly, annuities accounted for 60.8% of retirement solutions in a pre-budget world and only a projected 36.6% post budget . • We asked advisers what proportion of clients who will be considering drawing benefits for the first time before April 2015 will take various following options vs. the options they would have selected had the budget announcements not been made, highlighting that the market will be radically altered. • Advisers think annuities (of all types – though less so for enhanced) will be the biggest casualties, with (pre April 2015) a 40% reduction in the proportion of clients considering any type of annuity – numbers that chime with some of the reported on figures we are seeing (see Standard Life). • Put starkly, annuities accounted for 60.8% of retirement solutions in a pre-budget world and only a projected 36.6% post budget - though it’s also important to note that 20% advisers are undecided. Annuities from "small pots" look set to be the real casualties. ”

12. Looking ahead (post 2015) Q. For those considering drawdown for the first time after 5th April 2015 when drawdown becomes completely unconstrained, what % do you think will… SAMPLE SLIDES • For those considering drawdown for the first time after 5th April 2015 when drawdown becomes completely unconstrained, advisers expect a heavy skew to drawing down in instalments (56% of clients). • Though just under a quarter of clients are expected to draw down the entire fund in one lump sum with only 17% expected to annuitise… based on the solutions that are available now.

13. Tony Wickenden, Joint MD, Technical Connection e:tkw@tecconn.demon.co.uk m: 07802584743 Phil Wickenden, MD, So Here’s The Plan e:phil@soherestheplan.com m: 07966092075 Thank you We look forward to exploring the opportunities with you