Advisers should not be abandoning defensive assets

16 July 2020

Advisers and their clients should not be abandoning defensive assets just because of the likelihood of a prolonged low interest rate environment.

That was the consensus of panellists participating in Money Management’s Retirement Incomes webinar with Challenger head of technical services, Andrew Lowe stating that low expectations of returns from defensive assets did not mean advisers and their clients should be abandoning defensive assets altogether.

“Defensive assets continue to have a really important role to play in retirement portfolios for a lot of Australian retirees and I have not come across a whole lot of Australian advisers who have abandoned defensive altogether,” he said. “Whether it be a high rate or low rate environment, they serve a purpose.”

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Allianz Retire Plus research and relationships manager, Tim Dowling agreed with Lowe that there was no single product or silver bullet that fitted the decumulation problem.

He said that, for this reason, it was a case of advisers using building blocks to address the unique retirement needs of retirees.

Dowling said advisers needed to understand that the risks that retirees were facing were not just technical risks in circumstances where there were a wide range of behavioural risks that came into play such as loss aversion.

He also claimed that cash was not a suitable vehicle to address retirement needs in circumstances where “cash is no longer king” and being invested in a growth portfolio in retirement significantly increases the likelihood that your money will not run out.

Like Lowe, he acknowledged the value of annuities within a broader retirement incomes strategy but also emphasised the value of stochastic modelling in developing an answer for clients.

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Thank you for an interesting webinar, the panelists were knowledgeable in their fields and provided food for thought, but jeepers Mike, you couldn't have brought together a less diverse panel if you tried!

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