Planning around sequencing risk for long term benefit

Many traditional approaches to retirement planning do not involve a centralised retirement proposition and are much less likely to account for those new risks seen in decumulation, such as sequencing risk, meaning clients run a greater risk of not achieving their retirement goals.

A centralised retirement proposition brings many benefits to both advisers and their clients - it gives an advice structure and plan for when clients need to take an income in retirement and helps to mitigate some of the associated risks.

Sequencing risk is one of the primary risks associated with retirement planning and must be considered carefully as even a short-term impact can have long-term implications. It is not always possible to completely avoid risks when a client is in decumulation, but it is possible to plan for them to try to mitigate the severity of the impact.

Mitigating sequencing risk by using a centralised retirement proposition brings long-term benefits to clients

Is a dedicated decumulation solution worth it?

We have seen that a large number of advisers do not use a dedicated centralised retirement proposition for their clients in the decumulation phase of life. This means that there is a high number of investors exposed to unnecessary risk and potentially not meeting their retirement goals. A decumulation solution can help provide protection from short-term market shocks so that a client's portfolio does not devalue early in retirement with long term consequences.

By setting aside some of a client's investments for short-term protection, you are better able to provide them with longer-term retirement income security and help them achieve their retirement goals such as a house remodelling, contributing to a child's wedding or a big holiday.

How can FE Investments help?

At FE Investments, our Decumulation model portfolios are built specifically for a broad range of risk profiles and investment terms, and there is greater consistency and control around the asset allocation. The beauty of our approach is that model portfolios of different investment terms can be mixed to meet the specific withdrawal profile and cashflow plan of a client, while also aiming to mitigate sequencing and shortfall risk.

We understand that retirement planning and creating a retirement investment portfolio can be a stressful experience for both the client and the adviser, and we want to help.

We have developed our decumulation illustration tool to help advisers show the effects of retirement planning, specific to their client and how a CRP can help alleviate common retirement risks.

Find out more about how our Decumulation investment strategy can help protect from sequencing risk