Australia’s $4.5 trillion superannuation system is entering a defining era. As a growing range of retirement income products enters the market, advisers are navigating a more complex decumulation landscape than ever before.

At a recent webinar hosted by IFA, industry leaders explored why Australia’s retirement cohort is less confident than ever before in their spending capabilities.

Becoming a coach for retirees

Hugh Robertson, CEO of Centaur Financial Services, said advisers build confidence when they focus on trust and adaptability. At the end of the day, the client’s peace of mind is more important than financial returns.

It’s important to educate clients and lift financial literacy through clear, ongoing support, he said.

A major challenge for many advisers is educating their clients while navigating through economic and personal volatility. 

“It’s not just investment market volatility, but regulatory change and [changes] in their own lives,” said Robertson.

AMP Director of Retirement Ben Hillier agreed, adding that the role advisers play is not just as educators but also coaches who build strong client relationships.

“You’re a healer,” he said. “The role is changing. It requires a different mindset, new conversations, new tools, that advisers can use to navigate different parts of a client’s journey.”

“Advisers can boost that confidence in how much money clients have, and that it is going to last them. You [must] show something that's clear and can model out different scenarios visually for clients.”

Confidence to spend during retirement

Retirees are so scared of running out of money that many die with 90% of their starting superannuation balance intact, said Hillier.

Despite many Australians having enough money to live comfortably, a lack of confidence leads to people only drawing the minimum from their account-based pension, said Hillier.

“We need to give consumers more confidence. We also need to give advisers more confidence to help their clients to enjoy retirement and decumulate, not just cumulate.”

“They're not decumulating with confidence. That’s the focus of our retirement income philosophy – it’s about giving clients the confidence to decumulate according to their needs.”

As needs change, advice must change with it to give clients a broad range of strategies to achieve those goals.

North uses the Five Ls to tackle this problem and help build confidence by offering a needs-based framework for retirement planning.

“There’s liquidity, living, lifestyle, later and legacy. From a superannuation sense, all your money has a single need, it’s all for later. It’s all for retirement,” said Hillier.

“With a single need, you can have a singular purpose about how you invest it and how you allocate that. You just want to grow it as much as possible. But as you approach and enter retirement, those other needs become important.”

This categorisation of needs into the Five Ls promotes consideration by advisers and clients of the different types of retirement spending needed – such as what is ‘essential living’ and what is ‘lifestyle’. 

It also includes the trade-offs between spending ‘now’ and the desire or need for later life or bequest spending.  

Creating confidence with simplicity 

Showing real-time financial projections with integrated modelling tools makes a massive difference in growing confidence, added Robertson. 

“Clients want to be able to understand it to the level that they need to. They don't need to understand necessarily 100%, but to the level that they're comfortable.”

North’s latest technology, the North Interactive Wealth Portal visualises advice strategies, adjusts assumptions instantly and projects into the future with consistent, integrated modelling.

“You can do a client review, and you can go, ‘Okay, here's the combined situation of the last year, and here's your performance combined between spouses and across multiple accounts. Here's the asset allocation across all that’,” said Hillier.

“You can go to the next tab, and it does an automatic projection of the future, and with a tick of a checkbox you can visually see it with and without different allocations. You can do this live in front of the client.” 

When advisers show clients, they’re unlikely to run out of money, clients can focus on what they want retirement to look like and spend with confidence.

“The difference between a ‘yeah, you’ll be okay’ versus showing it — it’s night and day,” said Robertson. “We want to give these guys confidence that they can live the life they want.”