As people age, their priorities naturally shift. As we push closer to retirement, factors such as stability, predictability and reliability become increasingly important – and this is no different in the world of financial advice and investment strategy.
According to Remara managing partner Andrew McVeigh, a client’s age is a useful tool in understanding where they may be in their overall investment journey and what kind of financial strategy will best suit their needs.
“You generally have three defined periods in your investment life cycle,” McVeigh explained to The ifa Show. “When you’re younger, you obviously have the accumulation phase, so you’re looking for higher growth, higher returns. You can take a little bit more risk because you’ve got a lot longer to make that up if you have a fallback or a step back.”
For McVeigh, “younger” clients are typically defined as working professionals between the ages of 30 and 50 who have been in the workforce for a decade or more and feel ready and financially stable enough to start investing discretionary income.
“We encourage them into our Credit Opportunities fund, which is a wholesale-only fund, but also our Credit Income fund,” he said.
In this age group, EFT investments are more common and minor losses are not seen as setbacks but as part of the natural market cycle. These clients are generally more comfortable riding out volatility in exchange for long-term gains.
For McVeigh, advising clients in this stage of their lives into these “medium risk” investment portfolios and accounts is sensible and will likely align with their financial goals and appetite for risk.
But as clients get older and enter the decumulation phase of their lives, higher-risk and high-reward investment structures become less appealing. As highlighted before, stability and longevity become core values for people entering or already in retirement.
“We’ve got a lot of investors [approaching and post-retirement] now being attracted to investment grade funds,” McVeigh said, which are being specifically built to resist market unpredictability.
“It sidesteps a lot of that risk and it still provides a very attractive return for what we think for investment grade credit.”
In this decumulation phase, advisers are also directing clients into managed platform funds that allow for the maximisation of retirees’ super, enabling continued growth even as they begin to draw down their retirement savings.
Though not universal, the age and life stage of clients are key factors when deciding what kind of investment product to offer and should always be considered in a well-rounded financial advice framework.
