It’s personal – why advice matters in retirement

The Australian superannuation system has built up a huge community chest of capital. As the system gets closer to maturity, the focus shifts to ensuring that capital delivers more choices and an emotionally rich retirement for individual customers. The key to that personalisation is quality advice.

“When people are saving for retirement they’re accumulating capital,” says Shane Oliver, AMP Head of
Investment Strategy and Chief Economist. “In accumulation mode, everyone has one goal – build maximum capital. In retirement the goals shift, they’re as unique as the individual.”

Growing need for advice

What people want in retirement depends on multiple variables. Their health and that of their partner. The age of their children – and their parents – and the shape of those relationships. Longer lifespans and social change mean today’s retirees are more frequently dealing across generations and often with blended families.

So while some see retirement as a long period of rest, many will become carers up or down the family tree. There will be those who explore side hustles, study, seek new jobs. While some need to get away and explore, others relish the time to live in their homes rather than just sleep there.

That’s why financial advice is a key element of the retirement landscape. There may be a time when Artificial Intelligence can strategically and dynamically manage the nexus between a client’s financial situation and their unique needs and desires. But today, it’s individual advisers who close that loop.

“The transition from living off your pay packet to eating your capital is incredibly complex,”

says Shane Oliver. “And in a world where the investment rules that applied for the past
twenty years are changing, asset allocation and investment decisions are going
to get more complex. Most clients need more advice.”

Freeing up clients to enjoy retirement

Ideally a financial adviser will be deeply involved in their clients’ accumulation strategies by:

• maximising their personal contributions  
• optimising strategies like co-contributions and spouse contributions
• making sure their client’s investment strategy is aligned to their needs and risk profile.

Yet it’s at retirement that the value of advice starts to really hit home.

“A lot of the time my retiree clients come to me for permission. They want to know they can do things – like
a holiday – without risking their long-term lifestyle,”

says Clinton Smith, Director at Abound Financial & Lifestyle, Melbourne.

Today, a lot of government rules in areas like Centrelink, transfer balance caps and total super balance limits are built around individual numbers. “We’re focusing on using the two individual balances effectively,” Clinton says.

Alex Brown, a financial adviser with practices in South Australia and the Northern Territory says,

“You need a degree in practical psychology. You’ve got to be able to dig beyond a client’s first responses. Is it really a money issue? Or is it family or health that’s driving their decisions? What can you do to simplify it all for them?”

Alex says the solution is personalisation. He uses financial planning software to tailor projections and develops his own explanatory YouTube videos, brochures and even cartoons, to show clients how the various elements of their financial plan could work.

Pockets of cash, buckets of growth

Both Alex and Clinton say clients respond to a retirement income strategy built around ‘buckets’. Cash and term deposits buckets to meet short-term income needs and buckets of growth assets in account-based pensions. “The buckets approach helps them stay in the market,” says Clinton Smith. “And the more sophisticated ones will tip funds
into the growth bucket when markets are down.”

Alex Brown has begun to use the MyNorth Lifetime Income account with his clients, often alongside an account-based
pension. “For some clients, longevity of capital is king,” he says.

“Plus, with an index-linked account I can usually get clients more income in the earlier years of retirement. I have one client who can fund a cruise a year just from the extra income they generate from that strategy.”

AMP’s guide to retirement income

This is an edited chapter from Retire with Confidence – AMP’s guide to the new world of retirement income. If you’d like to read more, download the full paper here.