Choosing a wealth manager can become particularly important as you approach retirement. During your working life, the priority is often relatively straightforward: building your pension and investment portfolio. As retirement gets closer, the focus begins to shift towards protecting what you have accumulated and working out how to turn it into a sustainable income.
Use our wealth manager finder to help compare the best wealth manager for approaching retirement.
How To Choose The Best Wealth Manager When Approaching Retirement
The best wealth managers for people approaching retirement should therefore offer more than investment management. They should be able to help you plan how your pensions, ISAs, investments, cash and other assets can work together throughout retirement.
Retirement planning
One of the first things to look for is a wealth manager that provides comprehensive retirement planning rather than simply managing investments.
A good retirement plan should model how much income you are likely to need, when you intend to retire and how long your money may need to last. Many wealth managers use cash-flow modelling to illustrate how your finances could develop under different assumptions for investment returns, inflation and spending.
This can also help answer important questions such as whether you can afford to retire early or increase your retirement spending.
Pension and drawdown expertise
Pensions are likely to be one of your most important assets, so look for a wealth manager with strong pension expertise.
They should be able to explain your options for taking retirement income, including pension drawdown and annuities, and how withdrawals may affect your tax position.
If you have several workplace and personal pensions, a wealth manager may also be able to help you decide whether consolidating them would make your retirement finances easier to manage. However, transferring pensions can mean giving up valuable guarantees or benefits, so this needs careful consideration.
Managing investment risk
Your attitude towards investment risk may change as retirement approaches.
A significant fall in markets immediately before or shortly after retirement can be particularly damaging if you need to start selling investments to fund your lifestyle. This is sometimes referred to as sequencing risk.
Look at how a wealth manager intends to manage this. Some may maintain a cash reserve for near-term spending while investing the remainder of the portfolio for longer-term growth. The important point is that the strategy should reflect when you are likely to need the money rather than simply putting you into a generic “lower-risk” portfolio.
Tax-efficient withdrawals
Retirement planning is not simply about generating the highest investment returns. How and when you withdraw money can have a major impact on the amount of tax you pay.
A wealth manager should consider your finances as a whole, including pensions, ISAs, taxable investment accounts, cash and other assets. They can then help structure withdrawals in a tax-efficient way while making appropriate use of available allowances.
Fees and charges
Pay close attention to the total cost of wealth management. Charges may include financial planning, investment management, platform or custody fees, underlying fund charges and transaction costs.
Percentage-based fees can become substantial on larger retirement portfolios, so calculate what the service will actually cost you in pounds each year as well as comparing percentage charges.
Estate and inheritance planning
Retirement is also a sensible time to consider what eventually happens to your wealth.
A good wealth manager should be able to incorporate estate and inheritance planning into your wider financial plan and, where necessary, work alongside your solicitor or accountant.
Personal service
Finally, consider whether you actually like and trust the person who will be looking after your money. Retirement planning can involve decisions that affect the next 20 or 30 years of your life.
Ask who your main point of contact will be, how frequently your plan will be reviewed and whether you will have direct access to a dedicated adviser or investment manager.
The best wealth manager for someone approaching retirement should ultimately help answer three fundamental questions: When can I afford to retire, how much can I safely spend, and how can I make my money last?