Financial advisers are being encouraged to bring forward their retirement income planning conversations with clients.
A discussion paper developed by Allianz Retire+ and Ensombl drew on the personal experiences of five advisers collectively representing over 1,000 clients.
With advisers having to strike a balance between traditional retirement income products and more innovative solutions hitting the market, the report underscored the benefits of commencing these discussions with clients sooner rather than later.
“It is generally accepted that the earlier one starts planning their retirement income approach the better. All the advisers interviewed for this paper agreed that while an ideal ‘runway’ was at least 10 years out from retirement, in reality, many clients were not seeking advice until much closer to retirement, making it more challenging to design the optimal strategy,” it wrote.
“The design of new-era income solutions is intended to encourage and reward individuals for implementing retirement income solutions much earlier (while still in accumulation phase).
“This creates an opportunity – and an incentive – for advisers to bring forward their retirement income planning conversations with clients.”
Allianz Retire+ noted most advisers tend to call on a small core of established, widely available product solutions that underpin their client retirement income strategies. This typically involves the use of a term annuity, account-based pension, the age pension, and lifetime income solutions in conjunction with one another.
“Today, more than ever, retirees want the confidence to spend and enjoy the continuity of their lifestyle. For this, they need certainty and flexibility from their investment strategies, as well as solutions to the unpredictable financial outcomes they’ll likely face in retirement.”
The discussion paper referenced past Actuaries Institute research which discovered that combining traditional products, such as annuities, with new-era innovative lifetime income solutions can lead to a 30 per cent growth in retirement income.
Adrian Stewart, chief executive of Allianz Australia Life Insurance, described: “If advisers are to continue to play their central role in facilitating an optimal retirement income system, then their ability to evolve and develop retirement income strategies efficiently, consistently and transparently, is paramount.”
Having proactive conversations on retirement income planning with clients is also critical due to the knowledge gap that still exists in the lifetime income market.
Findings from Allianz Retire+ last year uncovered that while 49 per cent of pre- and post-retirees had heard of lifetime income streams, they were uninformed on the specifics of how they operate.
Some 30 per cent were aware and familiar with these products, and just 4 per cent held a lifetime annuity. On the other end of the spectrum, 11 per cent were completely unaware and unfamiliar with them, and 6 per cent were unsure.
The data emphasised the importance of advisers helping retirees understand their options for retirement planning.
