Approaches to drawdown are many and varied, reflecting a wealth of possible strategies and a range of client needs. On top of this fundamental complexity, advisers can add:
All of which have made drawdown an increasingly difficult challenge.
We interviewed five adviser firms[1] to get their insights on how they approach drawdown. We reveal how advisers are confronting this challenge and cutting through complexity by using structured conversations combined with time-tested financial planning techniques and tools to manage client expectations, build investment resilience and animate the discussion around withdrawal levels, capacity for loss and sequencing risk.
Advisers say their clients are looking for a balance of four things from their drawdown investment strategy – 1) an inflation-beating return consistent with their risk appetite; 2) some element of growth to fund their retirement; 3) the flexibility to draw a natural income; and 4) the ability to preserve capital and avoid the full extent of market setbacks that expose them to sequencing risks.
Based on these needs, it is little surprise that multi-asset funds, which invest in a variable mix of growth and income-generating assets, have become popular drawdown options with advisers. Our adviser interviews give an indication of how their drawdown conversations take structured routes, which can lead to multi asset recommendations for a range of risk-profiled client types.
Advisers emphasised three key considerations for arriving at a suitable drawdown investing strategy in their client conversations.
CPD Webinar on our Insider Guide Key Themes
Notes
[1] With thanks to: Duncan Chance, Meridien Financial Planning; Wayne Tandy, Tandy Financial Services; Peter Savage, Fairstone Wealth Management; Stewart Bicknell, Prosperity Wealth and Helena Wardle, Smith & Wardle Financial Planning.
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