Whether it’s overseas or in Australia, the advice profession is cementing itself as focused on lifestyle outcomes rather than investment managers, according to a panel of retirement experts.
Speaking at the Professional Planner Advice Practitioner Summit, Blackrock head of practice solutions James Kingston said the view around world is evolving and moving away from the traditional model of being product-led.
He cited a survey conducted in conjunction with Designing4Better which found the investment part of retirement was a low priority to clients.
“It’s more about personal wellbeing, spending time with your loved ones, having experiences and doing things that they love,” Kingston said.
Australian Retirement Trust head of advice Anne Fuchs said there is a “massive opportunity” for the advice profession to solely focus on the strategic aspect of advice.
“You need to believe in the simplicity because most members love their super fund; they’re not seeking complexity,” Fuchs said.
“We’ve found that a lot of members [have been] referred out and all of a sudden – I’m going to be controversial here – all of a sudden there’s managed accounts and model portfolios and they come back to us saying they just wanted an income account.”
Kingston said advice practices in the US are viewing themselves more as wealth coaches and this trend has reached our shores, to an extent.
“So, when you get to retirement you can actually have a plan on what you want to achieve and then work backwards to what income you need to do that and what that means for your investments,” Kingston said.
Advice practices overseas have also been observed to expand their networks of professionals, according to Kingston. He cited an example of using business consultants to help clients with firms they want to move on from, whether that be via winding down, selling or succession planning.
“As they get older, they [might also be] working with grievance counselors and other sorts of counsellors as well if they need help, so it’s providing lifestyle management. That’s where we’re seeing the evolution.”
Evolution post-covenant
Regarding how far off the Australian market is from this evolution, Kingston said has been precipitated by the covenant.
“From the clients we work with in Europe, they’re quite ahead on this,” Kingston said.
“By the time I left the UK five years ago [where Kingston’s adviser is located] I was having far more detailed discussions around potential income in retirement – and what I want to transition to is 30 years off. Nevertheless, it’s still worth thinking about.”
Due to the covenant, Wealthadvice principal Marisa Broome said she feared funds would come out with “a bunch of crazy” products.
“Some of these products are going to work but some will do well for the client,” Broome said.
“We’re going to need a lot of extra research, support and training so we can deal with the solutions coming out.”
AMP retirement solutions general manager Ben Hillier was skeptical about a slew of new products coming out, saying creating products under the covenant is not a “trivial” undertaking.
“I’m not worried we’re going to see a proliferation of products because to launch a product like that you need scale capability, appetite, and a long-term perspective,” Hillier said.
“It’s not trivial to guarantee to pay income to someone for the next 40 years.”
Additionally, Hillier did not believe the approach to designing products has evolved because of the covenant.
“That’s the latest piece of legislation but it’s actually the least powerful in terms of driving innovation.”
