A Better Retirement Portfolio Solution for Volatile Markets

Superannuation and pension accounts form a significant portion of most investor's investments. Yet many advisers and investors alike struggle to solve the strategic issues that affect this segment. Two specific challenges are sequencing risk and, as lifespans increase and people’s health improves, the conundrum of longevity risk.

For decades, planners have sought to cater for this large market segment. Now, investors, with the help of selected financial advisers, can benefit from a ready-made turn-key solution provided by Dynamic Asset. This end-to-end portfolio implementation and management service offers five goals-based investment portfolios; each is focused on a particular outcome and all can be blended in any combination. This is often referred to as the ‘bucket’ approach, which many advisers are familiar with. However, Dynamic Asset is unique in the Australian market, as it is the only provider with the necessary range of investment portfolios to meet the full spectrum of clients’ needs, across super and non-super investments. Advisers can directly link their client’s goals to specific professionally managed investment portfolios, which also helps clients understand the rationale of each investment portfolio and promotes client engagement.

Dynamic Asset resolves sequencing risk via a range of time-based portfolios that allow advisers to match investments to cash flow needs using a unique online Portfolio Construction Tool. For example, a client can manage risk or target a particular return by splitting their funds across cash or cash-like investments with a six to 12 month timeframe, short- and mid-term investments of one to two years and the remainder in long-term investments. This bucket approach provides the investor with up to five years of low-risk less-volatile investments that they can use the meet cash flow needs without having to call on longer-term investments during times of market stress. That is, they do not have to sell market-linked assets during a downturn.

Longevity risk is addressed in much the same way; by selecting the portfolios that target the rate of return required to ensure an investor's capital last for a specific period of time.

The other benefits of Dynamic Asset’s goals-based investment approach is capital protection and lower volatility. Each portfolio is constructed using dynamic asset allocation and while the investments may underperform in strong markets, the strategy protects clients from heavy losses during market downturns. This lower-risk approach offers advisers a second layer of strategic advantage and helps make’ capital last longer.

Dynamic Asset’s investment approach differs from the standard strategic asset allocation method, a mostly passive strategy based on backward-looking benchmark returns that requires investors to ride out the market’s ups and downs. This can work fabulously in a bull market, but fails during large market falls. In the end, there is little guarantee that the investment will even meet its target returns, since markets are often inefficient and investment outcomes depend on what part of the market cycle an investor enters and exits their investment.

Dynamic Asset’s portfolios, tools and portfolio management services provide a more transparent and logical means of navigating volatile or falling falling markets. The focus remains on the investor's goals and the most suitable portfolio selection to match. Whilst at the same time, resolving strategic concerns, such as longevity and sequencing risk.

There is a better way to manage retirement portfolio needs.