A CRP that works for you

Hello and welcome to Money Talks in association with Royal London. In today's episode, I'm joined by Ilana Miller, Investment Development Director at Royal London. Thank you for joining me today, Ilana.

Oh, thank you for having me, Kimberley.

So today we will be talking about Centralised Retirement Propositions. And Centralised Retirement Propositions or CRPs aren't mandatory, but the FCA has been very clear that retirement income advice is a high stakes area and that firms need
robust approaches that stand up over time. So to help with that, Royal London has published something a bit different, not just prompts, but collaborated with advice and planning firms to create a fully worked end to end editable example of a CRP. And I see you've also done some research into what the journey into retirement actually feels like for clients.

So today, we'll explore the increasing focus in this area, what actually makes a good retirement framework, and why real client behaviour makes that depth of thinking essential. So Ilana, if a CRP isn't mandatory, why is having a good one attractive to firms?

Ilana Miller   01:23 – 02:57

Okay, so there's two aspects here. There's what we want to do, the exciting bit, and what we have to do. So, let's just start with the have to do. So, a CRP isn't mandated by the FCA, but there is recognition that it expects firms to have a well-defined, documented strategy for providing retirement income advice that's tailored to the specific risks and needs into accumulation. And I'm sure we all remember The Review of Retirement Income Advice in 2024 and they said in that that firms with a Centralised Retirement Proposition were more likely to deliver consistently suitable advice.

So I know everyone will be very familiar with that and probably remember that there was also plenty for firms to be proud of. However, it has absolutely sharpened that focus on the quality and consistency of retirement income advice and the need to show that decisions are anchored, this thought through, repeatable approach that avoids it being too reliant on individual habits and gut feelings. So that's the have to do.

And secondly, and importantly, that's what we want to do. And for many firms, a good CRP isn't about control and compliance. It's basically just a way of setting out and making sure that every client benefits from the firm's best thinking on retirement planning, whether that's around sustainability of withdrawals, risk, behavioural or ongoing support. So firms that get this right aren't doing it to tick boxes for the regulator. They're doing it for better outcomes, stronger client conversations and potentially less regrets later on.

You've also mentioned behaviour. So, are you seeing this considered within CRPs?

Oh, increasingly so. Retirement is one of the biggest transitions clients will ever go through. And what's mathematically or technically optimal isn't always what's going to be psychologically tolerable. So we need systems and processes that work hand in hand with how people actually think and feel. So, if CRP feels like admin, I think it's really important to reframe that as it's just simply documenting your retirement planning process that you know works in the real world, for real people, commercially, regulatorily and emotionally.

And why publish a completed CRP framework rather than just principles or a checklist? Was there a demand?

Well, we are fortunate enough to have around 80 Business Development Managers who have strong relationships with financial planning firms across the country. So that means we get the benefit of many straight-talking views. And the overwhelming feedback from firms was that they don't always just want insights and theories. They sometimes just want a clear example of what good could look like especially with something so involved as a CRP.

And the other two points that always come out strongly in their feedback was one, a lot of the support where there's no cost for it comes from providers or investment managers who have a vested interest and therefore create, in this case, CRP support that focuses on the area that benefits them, mainly the investment or product solution that they sell. And it biases the guidance towards that. And that's really unhelpful as CRP is so much more than your Centralised Investment Proposition, so your CIP plus withdrawals.

So that was one thing. And the second thing that always comes out strongly, you might hear this yourself, is firms wanting to see what their peers are doing. And that's quite difficult. As understandably, firms can be reluctant to share their IP, such as their CRP. So, it was to help with all three of those things. We wanted to publish a fully worked, totally agnostic example. And we went out to firms across the UK and said, are you willing to share your CRP with us? We can help feed this in and then share the end thing with you. Once we created it, we then shared it with a small group of Financial Planning firms and to get their feedback before taking it more widely. So I think it was really important as firms differ so much, you know, in size, in their beliefs, in assumptions, the solutions that they like, making sure it was editable was essential. Making sure it showed how everything joined up, whether that was from the principles, segmentation, income strategy, client needs, was also important.

And then finally, I think it's important to say it's not a model just to copy and lift wholesale. It explicitly positions itself as an example to support firms building their own. And I think there was a couple of firms whose concerns, if I'm honest about what those were, who were worried that CRPs were just fixed documents with fixed decisions and it totally takes away the adviser's ability to consider those individual needs of each client. That is absolutely not the case. A really good CRP is just simply a framework that flexes to the needs of individual clients and really allows for that adviser judgment.

Right, so this is less write a document and more show your workings?

Yes, exactly. It's the difference between saying we provide good retirement advice and actually being able to show this is how we make good decisions repeatedly, even when markets move, rules change or clients’ panic.

So with that, are you seeing more firms looking to evolve their CRPs?

Yeah, I'm seeing evolution across most things now with that real mental shift from process to outcomes, regulatory expectations shifting, for example, most recently around ongoing reviews. And not least because of changing client expectations who now have AI in their pocket, making it much clearer, you know, what they value from financial planning.

So, we already all know that retirement advice is a place where inconsistency can be harmful. There's some irreversible decisions, heightened emotion and general vulnerability to consider. And the more complex the risk and consequential the outcome, the more benefit there is to be gained from having that expert adviser judgement that's supported by a clear framework the whole firm believes in. So, I think that's why we're seeing this sort of evolution. But saying that, we would still be surprised by the response as we knew the demand was there from the feedback that we were just talking about, but it has been higher than expected. We also expected it might be used more by smaller firms, but actually we've had a number of meetings with the much larger firms which shows that flexibility of it.

And we have been really happy with the feedback, being honest as you can imagine it takes a huge amount of work to pull in all of that feedback and publish this type of agnostic content. So, it is great to see that being well received. And then I guess saying that it is important to say of course we do know it's not for everyone, nothing is. There's going to be plenty of firms very comfortable, confident with their CRP or those who have a little interest in it and that is the beauty of being able to have the freedom to choose what we spend our time on.

Exactly. And you spoke earlier about the importance of setting out how everything joins up. It's more than just an investment decision. What are the key things you see from firms who are doing this really well?

I think the reason a good CRP joins everything up is because of the way clients experience retirement as one continuous journey, not a series of disconnected decisions. So, you know, their tax-free cash choice affects sustainability. Their emotional need for security affects investment risk. Their later life health changes affect income strategy. So it's really critical your beliefs line up with the recommendations that your team's ultimately making. So I think with that in mind, there's three things I noticed from firms that are doing this really well.

So firstly, they think principles before products. So their framework starts with their beliefs and assumptions around things like planning for full lifetimes, joint life realities, inflation, sustainable income, secure income as a backstop for essentials and of course, behavioural considerations.

Secondly, at the risk of being cliched, retirement is treated as a journey rather than a point in time. So, you know, they'll more explicitly break retirement into phases like transition, steady state, later life, because the risks and behaviours change across that time, meaning a one-off at retirement solution can be technically neat, but still fail a real person later on

And thirdly, that the non-wealth needs are built in, they're not bolt-ons. And that again was one of the things we saw in from the retirement income review. You know, they'll be intentionally holistic, not just income and investments, but health and care considerations, protection needs, vulnerability, education, budgeting, power of attorneys, property, all of the considerations that can enhance or derail outcomes. And if there is something they don't do or offer, that that is also set out too. So, it's really clear.

And that all sounds very different from CIP plus withdrawals.

Yes, definitely. Because I think, everyone agrees that retirement is a life transition, which isn't just a product problem. And financial planning firms are already experts at navigating that. So, the CRP is simply about making that expertise clear, consistent and scalable across the business.

So we've talked about what CRP is. So, let's consider what we hear from real people entering and going through retirement. What did you find revealing in your journey into retirement research?

Okay, so not necessarily revealing, but critical to consider is the extent to which retirement decisions can be driven by fear. So the report shows fear everywhere. Fear of change, fear of the unknown, fear of ill health, fear of the big one, death. And that fear can outweigh even a strong desire for security. So clients might say, I want security, but then avoid options they associate with finality, loss or bad value if they don't live long enough. So we know that fear can override that security instinct, which we also see elsewhere in life, of course.

Yeah, there is a lot of fear currently. But what does that mean for those designing financial planning services? How do they work with someone living in a potential constant state of fear?

Well, yeah, exactly. It really means designing for the foreseeable behavioural moments that out with just the spreadsheets. I've seen many firms use cash flow really creatively to bring those moments to life. And that's why in the framework, you do also see an emphasis on things like that secure income backstop for essential spending, planning across full lifetimes and treating education and ongoing support as part of the advice and planning model, not an optional add-on.

And one of the more uncomfortable findings is how confident people feel even when knowledge is low. So why does that matter?

Because false confidence is more dangerous than low confidence. Again, something we see elsewhere, but low confidence can paralyse people from making decisions, but it can also send people to seek help. Whereas false confidence can harden decisions early and in retirement, with some of those decisions being irreversible, it can result in really poor outcomes. And the report finds that even when knowledge is low, people can be highly confident, with an example being post-retirees who've accessed their tax-free cash. And it also found, no surprise, that peer stories can really reinforce incorrect beliefs.

Yeah, I've seen that with my mom's friends and they're the ones who are retiring and the stories that they share with each other. And thankfully, I'm in an industry where I can be like, hey, financial advisers exist. But then I just can't imagine where other people are just blindly it's the blind leading the blind, essentially.

Yeah, absolutely. Yeah, and financial planners have to deal with that all the time, don't they? Such and such said, my friends said, someone I work with, you know, challenging recommendations that have been designed for them based on something that someone else entirely with completely different resources and needs is doing.

Yeah, I mean, people even challenge doctors. Anyway, back on topic. So how can CRP respond to something like that?

So a strong CRP can build earlier engagement and education into the service, because if clients are forming these views from peers or from headlines, then the timing of that advice support matters as much as the technical content. And your CRP can also bake in behaviour related thinking. Some firms told us they've not thought to include in it, such as how you handle insisting clients, what ongoing monitoring looks like, and how you intervene when behaviour threatens outcomes.

And the research also highlighted the emotional difficulty of spending in retirement. People struggle watching savings go down. So, what can be done about that?

Yeah, I mean, it's really understandable. I think we can all empathise with that. You know, given our loss aversion bias and a lifetime of accumulating and being coached to stay invested, people describe the mental strain of seeing savings go down rather than up. And they even fear feeling like a failure if they access their pensions. You know, the profession is aware about pension hoarding happens. You know, I think there's been a lot of support. There's been a book out that talks about this. And those challenges around that person's identity, how they feel about themselves, and loss aversion are big contributors to that.

One client said to the interviewer, and I'll quote them word for word, they said, ‘one of the biggest things that was really weird is that when you retire, you start using your savings, and it's something I've never done. I've always created savings, funded savings, not taken from it, and that is one of the biggest mental, if you like, strains I've had. Seeing savings going down, not going up.’

So I think that kind of sums up exactly what we were hearing in that research. And the adviser skill here is they know spending is harder than saving for many people and that an optimal solution doesn't necessarily equate to a tolerable one. So, you know, advisers help clients give themselves permission to spend well, without fear and it's that advice and support that really helps the client balance emotional security with long-term sustainability and gives them confidence in their future.

How are you seeing firms addressing that? CRP framework can sound a bit cold or technical. Do you see these considerations being integrated in?

Yes, it does. It can sound. I think we have a lot of jargon and phrasing. I guess, you know, it's trying to find something that people will consistently recognise, but people can actually call these things what they like. But in terms of their considerations being integrated to that behavioural side, if it was my own financial planning business, I'd absolutely have it integrated through managing the psychological transition to and through retirement as a real golden thread throughout my approach. And that's just one small example from the Royal London (RL) CRP document. You can see how it's considered, for example, in the income strategies section, where it highlights there are times a client may choose something that isn't mathematically optimal if it reduces anxiety or improves their sense of security. For example, you know, cash buffer or pot strategies. And then including the education is part of helping clients move closer to better options over time.

So I think that's a great example of being very clear about saying we're optimising for outcomes people can actually live with, not just outcomes we can model. You know, and that psychological transition is truly an area firms can add great value. That has a huge impact on people, I've seen some great resources available out there to help firms. You know, I follow a number of them myself, such as Dan Haley, Christine Burns. And I've spoken to firms doing some really cool things themselves, such as them setting up communities for their own retired clients to share experiences. And one of them told me that one of their retired clients has even become an influencer himself, making YouTube videos of what he's doing, how he's feeling and getting his own following, so, some creative ideas.

I like that. I like positive influences, not the negative ones selling crypto coins or whatever, but yeah.

Yeah, exactly. Real people, real stories.

Exactly. So if a firm is listening and thinking, what do we need to do next? What's your message?

Well, I think most firms have something that represents a CRP. However, from what firms share with us and what we saw, it can be anything from one sheet of paper that mainly focuses on the investment decision, right through to these huge documents that have absolutely everything considered. So, I think for anyone who wants to review theirs, an easy place to start is just to get a blank copy of our template rather than the filled in example and then go through each section with your team. By doing that, I think it quickly reveals if there is agreement on how you think about retirement as a firm and any areas that need further agreement and capturing, you know, whether that's determining sustainability, withdrawal strategies, ongoing reviews, approach to client comms and vulnerability, or approach to behavioural traps. And then it would be thinking from that list, where do the biggest risks sit? Where does our judgement matter most? For example, where do we want flexibility? And importantly, what matters most to your clients?

Once that's clear, the framework just helps you document and apply that thinking consistently. Ultimately, you just want to look at your CRP and know it's a good reflection of your firm's thinking around retirement and what you do.

So finally, how do you want financial professionals to see Royal London in this space?

Well, I'd love them to see us as a real partner. You know, as a customer and organisation, Royal London have always been a champion of impartial advice, seeing it as the gold standard and are here to support firms looking to strengthen how their retirement advice is designed, evidenced and delivered. And we're not doing that by pushing products, but by sharing frameworks, structure and behavioural insight that help advisers do what they already do brilliantly, support people through one of the most emotionally complex phases of their life.

So thank you so much for speaking with me today, Ilana, and explaining CRPs and how they can be impactful for clients as well as advisers and their firms. And I hope to speak to you next time.

Oh, brilliant. Thank you so much, Kimberley.