Greater attention must be given to the implementation challenges retirees face as the industry works to close the gap on developing better-tailored products and improving the education for this life-cycle stage.
“The implementation is just as important as the investment strategy itself, but I’m not sure everyone is aware or thinks about the operational and implementation issues,” Bennelong Funds Management research relationships account director Stuart Fechner told selfmanagedsuper.
“By and large, traditional asset allocations and the different returns they offer go most of the way to meeting the accumulation objectives of most individuals.
“But in retirement, you have challenges coming in, such as longevity, keeping up with inflation in real terms, sequencing risk and potential losses during big negative [downturns].”
Fechner said the drawdown phase was therefore a crucial and arguably more important stage compared to the accumulation phase when considering product selection.
“Be it advisers or the end SMSF investors, especially if they’re not in the advice environment, that’s an entirely different knowledge base, and there are reams of products and offerings to get a handle on and understand,” he noted.
“In the drawdown phase, you need to look at that it from an individual products level and its objectives, and all the strategies available if you’re really going to be any good at meeting those challenges of longevity and minimising drawdowns, and equally meeting that objective for greater income.”
He said there are already some structured products available in the market that can effectively provide a good return with less downside exposure and are much more in line with retirees’ behavioural needs and issues.
“These types of products are much more palatable,” he noted.
“I think there’s been a bit of a gap and it has been narrowing in recent years, but I don’t think the industry’s been as far ahead of the game, so to speak, when it comes to that next phase of retirement and drawdown.
“Products and strategies need to have better alignments to retirees’ needs and have clearly defined strategies and outcomes they’re trying to deliver.
“For SMSFs, there’s the investments aspect, but also the implementation and operational side of things are an added [responsibility] as they’re running their own fund – someone has to manage it, in a very simplistic sense.”
This involves time, maintenance and upkeep from investors in order for the investment plan to run successfully, though some funds have this built in, he said.
