Advisers need to address longevity risk
Financial advisers are still not addressing longevity risk and having conversations with clients about what they will do if they live too long, according to one speaker at the Financial Services Council Life Insurance Conference 2014.
Head of strategic growth at Securitor, Annick Donat, pointed to an Actuaries Institute paper in 2012, which estimated that men and women would live well into their 90s by 2050.
"That's a fairly significant amount of years in post-retirement, 27-28 years. We don't have a strategy for that," she said
"It's not just about the product solution, because quite frankly, not enough people are putting enough money into the solution."
Donat said advisers need to go back to basics in having that conversation with clients. They need to ask how much the client is willing to save, what lifestyle they envisage, how they want to transfer wealth and what it means for them and their family.
"When I look at the populace of advisers we have, the majority are over 55, their clients are over 55. And there's this huge transfer of wealth that we're going to have an issue with.
"It comes back down to the cause and effect. It comes back down to the root of the problem of financial literacy."
Head of product at UniSuper Ian Lorimer said there was a culture of reporting everything as a lump sum to a client, which could be misleading. Rather than telling members they have $500,000 available to them, it was important to tell them they may only have a $10,000 income stream per annum available to them and find out whether that was what they understood it to be.
"I think part of the problem, especially from a fund's perspective, is we need to start reporting to members what this amount of money means as an income stream going forward."
Recommended for you
A financial advice firm has been penalised $11 million in the Federal Court for providing ‘cookie cutter advice’ to its clients and breaching conflicted remuneration rules.
Insignia Financial has experienced total quarterly net outflows of $1.8 billion as a result of client rebalancing, while its multi-asset flows halved from the prior quarter.
Prime Financial is looking to shed its “sleeping giant” reputation with larger M&A transactions going forward, having agreed to acquire research firm Lincoln Indicators.
An affiliate of Pinnacle Investment Management has expanded its reach with a London office as the fund manager seeks to grow its overseas distribution into the UK and Europe.
