No band-aid fix for retirement income problems
Leaving investment decisions to the professionals has natural potential to assist pre-retirees, but continuous priority shifts in the retirement market are resulting in increased risks which cannot be stemmed by a broad fix, executives at an Institute of Managed Accounts Professionals (IMAP) event said yesterday.
Speaking at an IMAP portfolio management event in Sydney yesterday, Lonsec chief investment officer, Lukasz De Pourbaix, and Martin Currie multi strategy portfolio manager, Will Baylis, said managers could no longer rest on their laurels and must increase their specialist knowledge.
In a discussion moderated by Nikko Asset Management head of product and strategy, Hendrie Koster, Baylis pointed to the need to preserve capital and lessen investment risks to align with retiree sentiment.
“If you want to not draw on capital too quickly, you need to have discipline around what you can and can’t spend,” he said. “Measure on sustainable income not current income.”
With 12 per cent of Australians over 65 far ahead of the global median of 10 per cent over 60, De Pourbaix said managed accounts professionals would be able to home in on the success previously reserved for retail funds and self-managed super funds (SMSFs) by building a “holistic focus” around portfolio construction.
“Within any portfolio structure when working with a retirement market priorities shift, there is a desire for income and it is quite challenging [and] greater sensitivity to capital loss as well,” he said.
“There is some sort of thinking that you should de risk in retirement, but if you think you’re going to make that month last, you have to generate some growth.”
Rather than a focus on providing every solution for every client, De Pourbaix said there was a shift toward customised solutions.
“If you look in the different products out in the market, there are increasingly those with many objectives,” he said.
“You’re seeing an increasing focus on specific objectives within retirement and from a regulatory perspective there is more of a focus on being really specific.”
De Pourbaix said sequential, longevity and market risks exacerbated by cautionary pre-retirees who wanted to keep their money safe could be curbed with specialist solutions, but professionals would have to win the trust of accounts specialists.
“Those products that have come out and tried to be all things to all people have failed,” he said.
“You’re seeing more fit for purpose strategies and you still have some trying to do all things but most of them haven’t got very far.”
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