Financial planning is for a large part pension planning. Over the last decade this has particularly become a necessity, as more and more people are dealing with a pension deficit. The state pension plus the defined benefit pension that many people have accrued is increasingly insufficient to generate the funds needed to pay for the basic and preferred expenses in the future. This is not merely the case in the Netherlands, but in countries like the United Kingdom and Canada as well.

Different uses of pension wealth

If you want to guarantee a certain amount of income during the pension phase, there are various options to generate wealth for this. The key question is how a retired person can optimally use this wealth. A consumer who structurally seeks supplemental income to maintain a minimal consumption pattern can decide at the pension date to purchase an annuity, which gives him a guaranteed income after retirement and also helps to cover for longevity risk. But if someone is more interested in making the incidental purchase of big ticket items, wealth can be saved and used for further investments. The capital will then be available in a flexible manner, and a sum can be withdrawn precisely at the moment when needed.

The advantage of an annuity is that it provides one with a guaranteed income for life. A flexible capital may very well deliver a higher return, but also brings the risk that the funds run out. In the United Kingdom this is known as the difference between an annuity and a flexible draw-down.


There exists a large group of people who basically receive no guidance in making the right financial decisions.

Make deliberate decisions possible

But not every consumer is in the position to make a deliberate decision. Wealthy individuals may be able to afford an advisor who can optimally inform them on their various possibilities. But less affluent clients do not have this luxury, or are unwilling to pay its price. This means that there is a large group of people who are really not properly guided at the moment. These consumers don’t understand what guarantee is needed to protect their minimal consumption pattern. Nor do they know what options are out there to realize additional wishes in the future at slightly greater risk.

Advice gap

The latter group has an advice gap: they do not receive advice, even though they desperately need it. This is the group that should receive attention from advisors, banks, pension funds and other parties. A solid advice should include the risks of the wealth development, but also the other relevant cash flows. Communication should furthermore be so straightforward that people in this group are able to make prudent decisions regarding their future. Such advice would furthermore meet the duty of care that banks and pension funds among others are committed to.


The question is which party will jump at the opportunity first to fill this advice gap…

A complete overview

The question is which party will jump at the opportunity to fill this gap first. Naturally, such a party must have an overview of the entire financial situation of a consumer. If the client has sufficient wealth to take some risks, then the advice must take this into account. But if this type of wealth is simply not there, then out of necessity the advice will have to play it safe.

Currently both banks and pension funds have a partial overview of someone’s financial situation, but they do not possess all the data. This situation is changing however, as financial data become more and more data digitally available. The speed of this development differs per country though.

Advice costs must come down

The challenge is to significantly lower the advice costs per client. As a result the advisor will move towards a different role. Instead of three personal appointments of 90 minutes each, there may be only room for two 30-minute chat sessions. The client will have to be guided better in making the decision(s), but the trajectory will be heavily automated. The advisor will therefore be deployed in a more focused manner. The entire process will moreover be monitored continuously; advising is, in other words, no one-time affair. But by now digitization has advanced so quickly that such a degree of efficiency can also be realized.

Opportunities in a new market

It is crystal clear that this is an attractive opportunity for parties that are willing to bet on it. It will be interesting to see who will take the lead on this.

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