REWARDING RISK

Financial advisers are poised to deliver better retirement outcomes for their clients using today's crop of products and strategies but navigating the various risks requires a fresh perspective.

- Lachlan Colquhoun

Ben Hillier's 83-year-old mother recently went on her fourth overseas holiday this year. It was, says Hillier, at his insistence.

A few years ago, his mother was convinced she wouldn't be able to travel anymore. She couldn't afford to do it, she said, and the insurance costs were prohibitive.

"I told her that was nonsense," says Hillier, director of retirement at AMP.

"I told her she had the same super balance she had started with, and she should start spending it now." Hillier's anecdote about his mother sums up much of his approach to superannuation.

Australians, he says, "can actually afford to be a lot more confident about their retirement." "They just need the right understanding of how to navigate the system," he says.

"There's often a lack of understanding of the super balance you need to generate the income which makes you comfortable, along with confusion about how to access even a part payment of the government pension." Hillier's optimism is reflected in the name of North's risk management retirement framework: SMILE. It is an acronym for the five leading retirement risks which rise and fall "to and through retirement" and which need to be understood in retirement planning.

Flowing through from pre-retirement to the transition phase and then post-retirement, North cites sequencing, market, inflation, longevity and emotional risks, or SMILE.

"Yes, it's a cute acronym but we actually think it's possible for more people to be happy in retirement," says Hillier.

"People often see their super as a tank with a tap installed at the top, and they want to live off the overflow and preserve what is in the tank for a rainy day.

"That doesn't make sense and it's not very efficient, but many people are absolutely terrified of consuming capital in retirement."

A secret weapon