Safe withdrawal and ‘bucket’ approaches are most popular, according to a survey of 192 financial advisers conducted for the Association of Investment Companies by the lang cat consultancy.
Almost seven in ten (67%) of those surveyed said they most frequently recommend that their clients hold cash to fund short-term expenditures.
Over half (55%) said they recommend a safe withdrawal theory, and 48% favour a ‘bucket strategy’.
Four in 10 said they secure basic client needs via a guarantee, while 34% chose a ‘natural income’ approach using yield-generating assets.
Annuities were the least popular of the strategies named in the survey (29%).
Over half of the advisers surveyed (61%) said investment companies offer tangible income benefits.
However, over three-quarters (79%) said they do not use investment companies.
One in 20 (5%) said they use investment companies but only as part of another product such as a DFM model portfolio.
Those who do not use investment companies said they do not do so due to their perceived complexity and risk, and the tendency to trade at discounts and premiums.
Nick Britton, head of intermediary communications at the Association of Investment Companies, said: “This research sheds light on advisers’ preference for different income-generating strategies. No single strategy has eclipsed the others, and it’s clear that advisers will often use different strategies for different clients, rather than adopting a one-size-fits-all approach.
“Most advisers recognise the ability of investment companies to smooth dividends by reserving income as a key benefit of the structure. For those who use natural income strategies, investment companies can provide a reliable (though not guaranteed) income stream with the prospect of growing income over time.”
The lang cat surveyed 192 members of its adviser panel in July and August.