Meeting FCA retirement income advice challenges with smoothed funds

This quote captures some the essence of financial planning: creating security and stability for the future through decisions made today. For advisers, this long-term perspective is vital, particularly when navigating the challenges highlighted by the FCA’s Retirement Income Advice Review. The review has shone a spotlight on several areas, we highlight three for advisers to deliver confidence and value to clients: 

• Navigating volatility: Providing stability and resilience amidst unpredictable market conditions, helping clients stay resilient amidst uncertainty that can erode confidence and derail plans.
• Suitability and aligning risk profiles with changing needs: Ensuring investment strategies suit specific client needs and evolve as clients transition from wealth accumulation to income decumulation phases, requiring a dynamic approach to managing risk.
• Establishing sustainable income: Balancing growth potential and returns with the risk of outliving retirement funds.

As some clients seek peace of mind and tailored advice, these challenges represent opportunities for advisers to demonstrate value and build enduring trust. Smoothed funds, such as PruFund, can offer a practical and effective solution to meet these demands.

Navigating volatility: The importance of stability 

Market volatility is an inevitable part of investing, but its emotional impact can have outsized consequences. Sharp downturns often trigger fear-driven decisions, such as withdrawing investments prematurely or shifting to overly conservative options, which undermine long-term growth potential. 

Smoothed funds address this challenge by reducing the impact of short-term market movements. Smoothing aims to spreads returns over time and these funds can provide a steadier investment experience, allowing clients to remain focused on their long-term goals without the anxiety of sudden losses. 

For advisers, the ability to offer such stability reinforces their role as a source of reassurance and expertise, helping clients maintain confidence through periods of uncertainty.

Suitability and aligning risk profiles with evolving needs 

Client risk profiles are not static—they change over time as financial objectives shift. For clients in the accumulation phase, growth may take precedence, and they may tolerate higher levels of risk. However, as clients approach or enter retirement, their priorities evolve to include income generation, capital preservation, and protection against longevity risk. 

Smoothed funds are uniquely suited to support this transition. By offering both the potential for growth with the smoothing of short term market fluctuations these funds can help advisers tailor strategies that remain aligned with clients’ changing risk tolerance.

During the accumulation phase, smoothed funds can provide stable growth by minimising the potential emotional toll of volatility. In decumulation, they serve as a dependable foundation for sustainable income, particularly in periods of market fluctuations.

Advisers can use smoothed funds to create holistic plans that adapt seamlessly to clients’ evolving needs, ensuring suitability at every stage of the financial journey.

Delivering predictable growth and sustainable income 

One of the FCA’s key concerns is ensuring that retirement savings are managed in a way that supports sustainable income throughout a client’s lifetime. With people living longer than ever, the risk of outliving one’s assets - longevity risk - is a growing challenge. 

Smoothed funds seek to offer a compelling solution by delivering predictable growth which enables income sustainability. Diversified across a range of global asset classes with processes to smooth short term ups and downs, these funds aim to deliver steady, risk-adjusted returns.

For advisers, smoothed funds simplify the conversation around balancing growth and sustainability. They enable advisers to demonstrate how predictable returns can support income needs without exposing clients to undue risk, aligning perfectly with the FCA’s focus on delivering measurable outcomes.

With two decades of proven performance and a client-focused design for its currently 450,000 UK investors, PruFund delivers a unique combination of benefits: 

• Stability and scale for long-term confidence: PruFund’s established, transparent smoothing process and global diversification unmatched by competitors provides resilience through 20 years of market cycles, offering peace of mind for both advisers and clients. 
• A smoother journey for clients and advisers: By reducing volatility, PruFund helps advisers keep their clients focused on achieving their financial goals without the distraction or worry of short-term market swings. 
• A core component for holistic investment strategies: PruFund integrates seamlessly into diversified portfolios, supporting accumulation, income generation, and wealth preservation with a focus on sustainable, client-centred outcomes.

Importantly, the Expected Growth Rate (EGR) represents the long-term growth expectation of the fund, adjusted regularly to reflect ongoing market conditions. This ensures that clients can draw income with confidence, even during periods of market stress.

PruFund’s ability to deliver predictable growth and therefore sustainable income makes it a natural fit for advisers seeking to address the FCA’s highlighted challenges while providing meaningful value to their clients.

The value of an investment can go down as well as up and your clients may get back less than they've paid in. Past performance is not a reliable indicator of future performance.

Planting the seeds for long-term confidence 

Warren Buffett’s analogy about planting trees for future shade captures the essence of an adviser’s role in financial planning. Today’s decisions lay the foundation for future security, and smoothed funds like PruFund enable advisers to address the FCA’s challenges with confidence. 

By offering stability, aligning with evolving client goals, and delivering predictable outcomes, advisers can instil peace of mind and build trust. Smoothed funds not only support sustainable growth and income strategies but also create an investment experience that is easier for clients to navigate, reducing stress and fostering long-term engagement. 

As an adviser, your role is more critical than ever in guiding clients through the complexities of retirement income planning. With solutions like PruFund, you can ensure that your clients enjoy the financial shade they’ll need to thrive in their later years, no matter how turbulent the journey may be.