Creating investment solutions for retirement
Using modelling to build better risk management solutions for retirement
While customers in the accumulation phase are primarily concerned with growing the real value of their assets, those transitioning from accumulation into withdrawal face a fundamentally different and more complex set of risks. Market volatility, falling bond yields, and longevity risk can all lead to dramatic and permanent damage to individuals’ retirement prospects and the value of any bequest. Traditional investment models which seek to manage portfolio volatility will not work for investors nearing retirement.
At the same time, the growth of defined contribution saving, and the increasing role of ‘default’ funds in auto-enrolment schemes will create significant opportunities for investment providers who can offer effective, differentiated solutions which allow customers to manage these risks effectively.
An ever-increasing range of products exist: annuity-matched funds, diversified growth portfolios, target date or lifestyle investment products, together with a range of insurance and capital market solutions which offer protection against downside risk. The challenge is to build a proposition which offers competitive advantage and enable retirement savers to use it effectively.
Our Solution
As part of Barrie & Hibbert’s suite of Investment Governance Services, we work with clients to develop their own differentiated retirement solutions. Using our core scenario model, we calculate a series of risk metrics - the Retirement Risk Dashboard - capturing the interaction between investment returns and the scheme member’s cash flows. This allows us to evaluate the potential range of outcomes in relation to a defined retirement planning objective, for a range of possible investment solutions. This can be used to build asset allocation glide-paths for Target Date products, or evaluate the impact of product guarantees on the retirement outcome.
Benefits:
Working with Barrie & Hibbert to enhance your drawdown review service:
| Objectivity & Transparency | Communicate risk in your retirement solutions using objective analysis, using measures that relate to customers’ retirement savings objectives. Full documentation of all our modelling assumptions and access to our modelling services desk. |
| Independence | Using the market-leading risk modelling specialist, demonstrate the validity of your product design and governance process and ensure advisors and customers have confidence in your proposition. |
| Competitive Differentiation | Demonstrating a “best-practice” approach to product design and investment governance provides a clear competitive differentiator. |
| Business Retention |
Empower advisors to use your products effectively. Develop better understanding of your products. Increase the likelihood of meeting customer expectations. Improve business retention. |
| Consistency | Develop a risk-grading framework which covers the full range of investment, pension saving, and retirement income products, providing a consistent framework for design, governance and communication across different channels and products. |
