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Navigating Uncertainty in Retirement

Updated: Mar 2, 2022

While wealth transfer from one generation to the next is putting pressure on financial planning practices to attract younger clients, there’s no doubt that advice during the retirement years is still a mainstay of the profession. With draft retirement income covenant legislation expected to make its way through Federal Parliament by July 2022, there is a strong focus on creating a better framework to meet the financial needs of Australians during retirement.

The covenant is being introduced by the Government to “support retirees to have the confidence to spend their hard-earned savings, while enabling choice and competition in the retirement phase of superannuation.”

However, a new study from Fidelity International and research firm MyMavins discovered that the time when people are likely to struggle most with their financial choices is in the pre-retirement phase. This highlights just how important access to financial advice is for clients well before they exit the workforce.

Different perspectives on retirement

This primary consumer led research conducted in September 2021 was commissioned by Fidelity International and conducted by MyMavins. The findings add a fresh perspective to help financial planners better understand their clients’ experience on the retirement journey, even those with some years to go before they start spending super savings. It’s also a timely reminder of just how varied the journey through retirement can be for each individual. For financial planners, it provides evidence that its more important than ever to have regular touchpoints with clients both before and after retirement to demonstrate value and take time to offer support through each transition period.

What drives wellbeing

The new research identifies seven critical drivers of life satisfaction for older Australians. Emotional experience is the strongest driver of wellbeing, suggesting that it is also the best predictor of overall life satisfaction. The other important drivers are feeling confident and resilient, having purpose and meaning, a sense of control and connection with family and the community. Wealth and health are less important than all of these and are ranked sixth and seventh respectively.

The research points to lower levels of life satisfaction in people leading up to retirement across five of the key indicators – purpose, connection, control, confidence and emotional experience. Even if the retirement journey starts as expected, there are still complex emotions and unexpected events to deal with such as declining health and bereavement as well as the potential for financial struggles. Given these life satisfaction indicators generally rise as retirement goes on, it suggests that people can develop better strategies for dealing with life’s curve balls and thrive in spite of them.

A financial planner can add value as these life events arise and a key finding from the study was that the earlier a client starts the advice relationship the better. Looking forward to retirement beforehand and feeling in control at the outset are strongly associated with being more satisfied in late retirement.

When we look at drivers that are statistically more important to life satisfaction in retirement, emotional experience, confidence and purpose come out on top, followed by control and connection. Wealth and health are important of course, but less critical in comparison and this gives us a different picture of what matters most on the retirement journey.

From an investment perspective, having any plan is certainly important in terms of confidence and control. Having adequate buffers built into a plan can help people have the flexibility to manage changes that will come their way eventually and this can add to the quality of their emotional experience. They feel prepared now and find themselves better able to navigate uncertainty with a positive mindset when they reach the crossroads at the start of retirement or a crisis once retirement is underway.

A supportive advice journey

A holistic financial planning and investment approach that takes into account more aspects of the retirement experience certainly pays dividends for satisfaction in the long term. The Fidelity Retirement research also shows that the more comprehensive the plans late retirees have made in the past, the more satisfied they are likely to be in the present.

A plan that prepares people emotionally as well as financially will have avoiding boredom and a sense of purpose in scope as well as aged care needs and funding travel.

Confidence and control are the more obvious outcomes from the whole advice process. But financial planners can help clients have positive emotions by helping them picture the future and feel optimistic about it. Talking in detail about what a client wants to achieve can help them find their sense of purpose beyond the work priorities that used to drive them forward.

Informed and confident clients

Regardless of a client’s navigation style, they can all benefit from the peace of mind that comes from having a firm grip on their finances and confidence that the way they spend now doesn’t put their future spending at risk. To an extent this confidence comes from improving knowledge of their own financial behaviours and how to make better choices as a result.

Clients don’t want to be educated but they want to learn. They can learn very effectively about what will work best for them financially by being involved in the decisions about their money. Planners can guide them through a co-creation experience, building their confidence by helping them understand the trade-offs they need to make. Using modelling software to showing them projected outcomes of changes in their spending and lifestyle decisions can help them test different life choices and the best and worst case scenarios they might be dealing with in future.

A retirement plan should anchor on clients having the confidence to spend rather than the capital they have to invest. That means the focus of conversations with clients should be on consumption rather than how much wealth they have or need. A plan that’s sufficiently flexible can give them comfort that even if unexpected things happen like a significant drop in the market or a major health event, their consumption needs may still be met. And even if they can’t, most retirees are adaptable and are willing to cut back on discretionary expenditure.

Flexible income strategy is key

When it comes to spending with confidence, communication with clients on their habits and expectations is one side of the coin. An appropriate investment framework with contingencies built in is the other.

From an investment perspective, income layering is one of the most comprehensive approaches to retirement planning. It’s a more complex strategy but it’s also more precise in targeting outcomes, enabling a planner to overlay consumption needs over decades with an individual asset/liability model.

Using fit-for-purpose investments for retirement is another way of increasing certainty and confidence by reducing the roller coaster whilst still delivering the right kinds of outcomes for retirees.

While this survey gives the financial advice profession food for thought on what matters to clients most in retirement, it’s important to acknowledge that many financial planners already provide an advice experience that aligns with these research insights. It’s clear that there is significant value realised from financial advice through all stages of retirement regardless of wealth and age. Advised Australians experience less financial stress in retirement and more confidence, competence and resilience plus they feel happier.


Excerpts from an article published February 23, 2022 on

by Richard Dinham (Head of Client Solutions and Retirement @Fidelity International) with contributions by Jason Andriessen (Consulting partner @MyMavins)

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