Bespoke Decumulation

21 January 2015

Frank Potaczek – Senior Vice President (Funds and DFM)

So your client has been accumulating wealth and soon it will be time to move to the decumulation part of the strategy: making sure that there is enough income to….

To what? Maintain a basic lifestyle, accommodate an active lifestyle, pass on wealth to the next generation? And those are the questions about client outcomes that should be asked in the decumulation phase of a client’s financial plan.

To accumulate capital to spend in retirement, it has been normal to deploy capital and regular investment into risk assets, in three broad ways: defensively, in a balanced way and growth orientated – or possibly all three at different life stages, depending on the client’s circumstances.

In retirement, however, there are potentially more outcomes to plan for than just accumulating wealth. So it seems reasonable that ‘in retirement’ planning has a much more personal and individual focus.

Discretionary managers of some longevity, in the main, began as asset managers for individuals and families that had already created wealth, other than through investments. The job of the discretionary manager was to maintain the wealth usually in real terms and probably provide a stipend to individuals until the capital amount was passed onto the next generation.

Of course, nowadays, discretionary managers can provide clients with mandates that provide the potential for capital growth as well, for accumulating clients, but they are still well versed in wealth preservation strategies within a portfolio: maintaining capital, generating income (real or nominal) or using up part of the capital in a controlled way – decumulation, to fund a particular range of lifestyles.

Tax wrappers constraints aside, the private client manager has a range of investment building blocks from which a personalised income stream can be created, paid out at a time to suit the client from a diverse range income producing assets.

Income needs may change through retirement and there may well be ways to automate the movement between asset classes to provide the anticipated changing income requirement needs for a retiree – a type of lifestyling; but a private client manager has the ability to individually tailor these changes to a specific client requests and needs.


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