Retirement advice needs to ramp up
Financial advice standards need to significantly improve to help clients build complex retirement strategies that take into account their risk exposures and appetite.
That is the assessment by a joint paper on retirement income solutions for the 21st century for the Actuaries Institute, which said that superannuation funds should be striving to boost engagement with members so they can make informed decisions.
Authors Anton Kapel (AMP) and John Nicholls (Towers Watson) also expressed concern over the Financial System Inquiry's recommendation of a comprehensive income product in retirement (CIPR), saying that while the concept is appealing, taking a "one-size-fits-all" approach to defining a CIPR could compromise on outcomes for clients.
"This is a complex problem, similar to but far more challenging than the issue of getting Australians comfortable with defined contribution nature of the Superannuation Guarantee Scheme when it was introduced in 1992," the authors said.
Although the paper analyses various retirement strategies in a simplified manner, the authors conceded there will not be a universally accepted "optimal" solution even if members have similar financial resources.
Furthermore, financial market conditions at retirement will also determine outcomes, as will risk appetite, it said.
"And this is before taking account of the added complexity that "retirement" is becoming less and less a discrete point in time for an individual, but rather a progressive journey over a number of years from pre-retirement to a transition to retirement phase before fully stopping work," the authors wrote.
AUTHOR
Malavika Santhebennur
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