UNFETTERED DRAWDOWN: THE FINAL FRONTIER
People can now take what they want, when they want. This gives enormous freedom, but also introduces significant risk.
Of course, the only certain way to avoid this is to buy a guaranteed income. This is a sensible approach for some people, but drawdown is becoming the new normal for many.
Navigating the hazards people face in retirement is different from helping people build up savings and the consequences of getting it wrong can be devastating.
Differences between accumulation and decumulation
Where the buck stops
There are five key risks people face in retirement:
These are all interrelated. For example, assumptions about life expectancy will potentially impact the income that can be taken, which in turn is likely to influence the investment strategy.
The investment strategy will also be dictated in part by the client's capacity for loss.
This complex array of risks and dependencies tests the skills of financial advisers. It was Cicero who said ‘advice is judged by results not intentions’.