Switching strategies may lead to a risky retirement
In protecting their capital in retirement, investors need to consider the concentration of risk in any new investment strategy they take on, according to Wingate Asset Management chief investment officer Chad Padowitz.
Sequencing risk is having an even greater impact on retirement savings as Australians live longer, but the belief in an 'investment reset' at retirement can lead to poor performance over the long-term.
"The capital risks of equity investments have been brought to investors in recent years - especially those who are about to retire - as many have seen erosion of their superannuation," he said.
"When stock markets suffer large declines near or during retirement, the impact on future income because a retiree ends up with less capital to invest can be significant."
Despite this, Padowitz said investors should be focused on maintaining a balanced portfolio, as a switch to low-return assets may lead to long-term risks.
"With equities, retirees should ask themselves whether now is the right time to be selling, especially with the risk of further cuts to interest rates and the impact this has on cash returns," he said.
"It may provide adequate pension income in the short term, but be unable to support changing needs throughout retirement."
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
