Advisers want certainty and comfort as retirement strategies evolve

The role of annuities: peace of mind, but only if the rates and features stack up

Lifetime annuities remain a divisive topic among advisers. Nearly all acknowledged the behavioural value of guaranteed income, but only if the economic rationale is strong.

“There’s a psychological benefit to guaranteed income,” said Ashley Tilston of Spectrum Wealth Partners.

Tom Maloney  from Falcon Financial Advisers noted that annuity products are a great idea, but the feeling of forever foregoing that portion of their capital is a “big bridge for a lot of clients to climb”.

Many of the advisers said annuities have a firm place in specific scenarios, however noted that product failures in the past have made them cautious. Several spoke about “false starts” in the retirement-income market and stressed that new offerings must demonstrate durability.

“Having certainty is going to be key,” said Jason Petersen of 5 Financial. “If you’re having those conversations early, you need that certainty as an adviser to know that these things are going to last, they’re going to be around at the time the clients need them.”

Sequencing risk: the mathematical threat clients don’t understand

While clients worry most about longevity, advisers said sequencing risk is the threat they personally fear most on clients’ behalf – particularly during the “retirement risk zone” five years either side of retirement.

Volatility is not the problem, said Stallman IQ’s John Stallman. It is the timing of returns.

“Sequencing risk is just maths,” he said, adding that “dud returns” from being too conservative can be just as much of a risk as volatility.

Emerging products aimed at smoothing returns or cushioning drawdowns were also noted, including market-linked annuity hybrids and protected-equity solutions. Advisers were broadly supportive of these innovations, provided they remain transparent and easy to explain.

However, more so than the specific product, for clients the key is to begin with lifestyle aspirations, time horizons, and spending patterns.

“In clients’ minds, the product is irrelevant,” said Dane Pymble from Life First Advice. “It’s what that outcome that that product gives them in terms of a life outcome or a goal being achieved.”

Starting early: shaping expectations from age 40

A major point of divergence among advisers was the age at which they begin discussing retirement income products. Some argue that these conversations must start at 50 or later, once financial circumstances are clearer.

Others insist that advisers should raise long-term retirement strategies – including the concept of guaranteed income – as early as age 40.

Petersen, for instance, said it should be looked at “as soon as you’ve got a client essentially”, whether that be from around 40 or “even earlier”.

Similarly, Pymble said he talks to clients about the concepts right from the beginning, “more so around the objectives that are trying to be achieved, not the product solutions”.

Opposing views stemmed largely from concerns about product uncertainty: with retirement income products evolving quickly, it may be premature to discuss specific solutions too early. However, advisers agreed on one key point – concepts such as income sustainability, spending buckets, and sequencing risk should be introduced long before retirement.

Client engagement: education, technology, and training behaviours

Several advisers noted that increasing client engagement between meetings is crucial. One practice uses automated educational updates and reminders to keep clients focused on goals rather than short-term noise.

Another adviser shared a unique behavioural approach: training clients to feel excited when markets fall.

“We get very, very excited when the markets are down,” Chandna said.

“Our clients all know that we have a bell that goes off every time the markets are down and we’ve taught our clients that over and over again for years and years.”

Teaching the clients that a downturn is a buying opportunity, not something to fear, has led to clients now proactively calling wanting to invest more during market dips.

But this behavioural guidance also works in reverse. Advisers described clients who become “too excited”, particularly aggressive older clients whose ambitions begin to outstrip their actual time horizon.

A market ready for more innovation – and more certainty

Across the table, advisers welcomed the increasing investment in retirement-income product development, particularly from life companies and annuity providers. Many said super funds have been slow to innovate, leaving advisers eager for more tools that blend liquidity, guaranteed income, and capital protection.

However, the strongest message to providers was clear: products must be sustainable. Clients rely on their advisers for confidence, and they in turn rely on product providers for stability.

The consensus among the advisers was that lifetime products that offer some capital access, liquidity features, or market-linked components to reduce the sense of permanence were more attractive.

As Falcon Financial’s Maloney put it, the emergence of products that offer a guarantee of income, but some capital certainty as well is “almost like you can have your cake and eat it too”.

The concerns could be further eased as products continue to evolve, with options such as early withdrawal and death benefit payments able to address adviser concerns around the traditional inflexibility of lifetime income products.

Beyond the product, the advisers also want product providers to create educational tools, modelling, and long-term scenario support to help advisers explain lifetime concepts earlier and reduce client resistance at retirement.