Setting the platform for retirement

Platform providers will play a critical role in assisting planners in preparing for the impeding flood of retirees coming out of the workforce over the next 20 years, Colonial First State general manager product and investments, Peter Chun believes.

With the average number of Australians calling time on their career set to double over the next two decades, Colonial First State (CFS) is focusing on ensuring its platforms can enable planners to prepare a smooth path towards retirement for their clients.

In the post Future of Financial Advice (FOFA) world, CFS general manager product and investments, Peter Chun, said platforms needed to provide advisers with improved efficiency.

“In a post-FOFA world, a huge focus remains on efficiency and for platforms to really build out variations of tools for advisers. CFS has certainly been doing that with initiatives like our model portfolio functionality,” he said.

“The efficiency theme is really critical... advisers have been very much focusing on how they can be most efficient in building and running investment portfolios and we’ve responded to that in two ways.

“Firstly, it’s really been about our model portfolio construction functionality, and we’ve gone a bit further to incorporate the record of advice (ROA) capability…  so when advisers rebalance their model portfolios the platform also generates the ROA, so it’s all done with one click of a button.

“The second area is around managed accounts… we’re hearing a lot of feedback from advisers using managed accounts on platforms. We’ve always been an established player in this space through our custom solutions business and we’re continuing to enhance our managed account capability.”

While CFS has sought to support planners by providing platforms that streamline the process of delivering ROAs and overseeing managed accounts, the fund manager has also moved to boost the functionality of its platforms.

Chun said this focus was one of the main reasons why FirstChoice and FirstWrap were rated as the number one and two platforms by planners, according to the 2016 Wealth Insights Service Level Report.

“CFS has had three key areas of focus over the last 12 months or so,” Chun said. 

“We’ve taken a very strategic investment into our platforms to help focus on servicing advisers and what they need to do for retirees and we’ve been positioning our platform as a one-stop-shop for advisers.

“Over the next 20 years we expect more than 300,000 people a year will retire, which is more than double the number of people who retired each year over the past 20 years. This is really the phenomenon of the Baby Boomers retiring.”

With Baby Boomers in their hundreds of thousands set to call time on their working lives, planners will have to pay particular attention to four key risk areas – longevity, sequencing, inflation and income - Chun said.

As a result CFS has integrated both CommInsure and Challenger annuities onto the FirstChoice and FirstWrap platforms – a development that was recognised by Investment Trends with the Best New Functionality Award in its 2015 Platforms Report. 

“We’re the first platform in the market to enable advisers to combine an account-based pension with an annuity to help manage the longevity risks for their clients.”

With investment markets proving to be particularly volatile, and the wounds of the Global Financial Crisis fresh in the minds of fund managers, advisers and investors alike, Chen said enabling platform users to manage sequencing risk was crucial.

“When you stop work your ability to recover from a major market downturn is much more limited than in the accumulation phase, because you’ve stopped working and you’ve stopped contributing to your super fund, so the need to manage sequencing risk is even greater,” he said.

“Again, over the last 12 months we’ve introduced a suite of managed risk strategies… and what these funds look to do is they enable the investor to stay invested in equities, but there’s an active risk overlay strategy, where we’re managing some of the downside risks.

“The way we like to describe it is it’s about having the confidence to stay invested, because often in times of market volatility – and we’ve seen quite a bit of that of late – having these types of managed risk strategies is very helpful.”

Platforms can also help planners prepare clients to deal with the impact inflation and income risk can have on their retirements, Chun said.

“What most retirees need is to ensure they are able to keep pace with inflation… so having a strategy to help them achieve real returns [is important] – so [that’s having access to] real return funds and multi-asset funds, so we’ve added a couple of these options over the last couple of years,” he said.

“And finally the other need for clients is income, so retirees in this phase need their account-based pension to generate good income for them to life off in retirement.

 “So it’s very much been about helping advisers address these four risks, longevity, sequencing, inflation and income.

“That’s been very much what we’ve tried to do in terms of building up our platforms so that advisers can give the best retirement advice and help their clients manage this phase of their life.”


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