A quarter of Australians will be over the age of 65 in 2041, so they need to invest carefully to make their money last throughout their retirement, particularly amid the low global interest rates, according to Perpetual Private.
General manager of product and investments, Jason Komadina, said with that in mind, diversification was a client's best friend.
He said his firm had been focussing on the "types of assets that were less linked to markets, less affected by volatility and provided better returns over the longer term".
Over the past five years they had been advising clients to invest up to 20 per cent of their portfolios in alternatives.
This included investments in private equity, real property, private debt, infrastructure, and property debt investments, Komadina said.
Assess and adapt
State Street Global Advisors' head of asset allocation, Mark Willis, said advisers needed to get their clients to adapt to the current climate, by cutting back on how much they lived on and avoid bank exposure.
"It's unpleasant, but clients have to adapt to their risk profiles or cut back on what they live on… either take risk on, or cut back," Willis said.
He added that retirees should be mindful that the big four really do the same thing and are exposed to similar levels of risk.
"A lot of clients have managed funds, ETFs [exchange traded funds], and single shares. But they could be loading up their bank exposure quite heavily. They need to focus on what exposure you have at the total portfolio level," he said.
AllianceBerstein's chief investment officer, Roy Maslen, also warned retirees of overexposure to banks.
He said retirees needed to get out of their comfort zones "as equities were yielding more than bonds, they needed to look beyond the standard big allocation of fixed-income, term deposits, and cash.
Another huge trend that had emerged was that more clients were investing their retirement nest eggs into exchange traded funds (ETFs) that were risk managed, according to BetaShares.
The Australian ETF provider said its portfolio of managed risk funds was set up to preserve clients' capital, provide a stable income, low volatility, and low fees to clients.
Managing director, Alex Vynokur, said that was why their managed risk series of ETFs doubled over the past 12 months to $230 million, with 75 per cent of inflows coming from retirees.
"At the core of clients' portfolios you need to have a combination of defensive equity investments, or managed risk investments and cash. And that's what advisers should focus on," he said.
Engagement and education needed for retirement
Global advisory group, Willis Towers Watson, said the fundamental problem of retirement income was that people were simply not saving enough to retire, but businesses could close that gap by engaging their workforce.
Head of retirement solutions, Nick Callil, said: "There is a lot of focus on the back end, how to stretch money over a time frame, the products and the regulatory environment. But before you get there, there is definitely an issue that our level of saving is not enough".
He said the superannuation guarantee (SG) was not sufficient for Australians to become self-reliant and relieve the burden on the Age Pension.
Callil said engagement at the employment level, education from fund providers, and having people in better paid jobs (so they could contribute to super after they had paid their living expenses) would help.
In my own experience I felt that school education could also play a role.
In years 11 and 12 I was part of the employed youth population - like 63 per cent of 15-to-24-year-olds, according to the Australian Bureau of Statistics (ABS).
That meant I received superannuation statements in the post, yet I was not taught what superannuation was.
It was not part of the school syllabus. But, I was interestingly taught how the economy operated and how to draw up a business' profit and loss statement.
Superannuation remained a grey area of my life until I decided to take matters in to my own hands, and studied to become a financial planner.
Deloitte partner, Russell Mason, said this lack of early education was reflected in the fact that lot of people did not even know what super fund they were in.
According to Sunsuper, 72 per of Australians did not know what the SG rate was.
The ABS found that financial security is the main reason people would work longer.
The ABS said almost a quarter of Australians aged 45 and over (23 per cent) intend to retire at the age of 70 (or over), compared to just eight per cent who planned to work to 70 in 2004-2005.
However, the majority of those over 45 said they planned to retire between the ages of 65 and 69.
Mason said if there was a concerted drive to increase financial literacy at school, with the government introducing compulsory financial services education, people could make better informed decision throughout their lives, and this could help close the retirement income gap.
Read part one of this feature: Travelling an unfinished road to Retirement