Guidance Deconstructed for life, not just at retirement. Nick Webb. JPMorgan Asset Management. Retirement Insights. Nick Webb

Transcription

1 @uktisa Nick Webb #SummitPC15 JPMorgan Asset Management Retirement Insights Nick Webb UK Platform Strategic Relationship Manager 1

2 Agenda What s hot the word on the street Deconstructing the advice process Asset Management Role? 29 What s hot the word on the street Has Pandora s box been opened? 30 2

3 What s hot the word on the street Has Pandora s box been opened? Lamborghini or a small family hatchback pension? Defined benefit transfers Income requirements Clients annual spend Where to obtain Tax planning in retirement Using allowances Mitigating IHT Death benefit nominations 31 Deconstructing the advice process Clients, and Advisers, understanding retirement risks underpinning and setting expectations Longevity Lifestyle Inflation 32 3

4 Clients need to understand their mortality If you re 65 today, the probability of living to a specific age Men 90 Women % Couple - at least one lives to specified age Years 90 Years Source: (Left) Office of National Statistics Life Tables, J.P. Morgan Asset Management. Data as at 30 September FOR PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION and to understand their spending patterns in retirement Average household spending and household size patterns of various age groups 44, ,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 39, , Housing Tax and NI Recreation, leisure travel Transport and Communication Food and Beverage Clothing and Services Health Other 15, to to to and over Source: Family Spending Survey 2012, Office of National Statistics, Data Released December 4th FOR PROFESSIONAL CLIENTS ONLY NOT FOR RETAIL USE OR DISTRIBUTION 4

5 Deconstructing the advice process Clients understanding risks underpinning and setting expectations Essential Income, Discretionary Income and Legacy process and strategies 35 Objectives of a successful post-retirement decumulation strategy Maintain a careful balance between managing lifestyle risk and longevity risk. Income required to fund Retirement Lifestyle Lifestyle risk Longevity risk Avoiding the uncertainty of running out of money. Annual Income Adviser Advice Platform/Wrap/Product Maximise Income received from their withdrawals, using retirement savings in the most efficient manner possible. 36 5

6 Tax Planning & Investment Risk Potential solutions Increasing risk/return Legacy Wants Needs Flexible pension ISA Bonds Collectives ISA Collectives Bonds Flexible Pension State pension Annuities ISAs Collectives/Shares Bonds Cash Instruments For illustration purposes only. Source: J.P. Morgan Asset Management. 37 Asset Management Clients Attitude to loss Advisers Centralised Retirement Process, pre and post retirement client engagement models Own CIP or Outsourced Life Companies Vertical Integration Where do Asset Managers fit in triangle? Incre easing risk/ return Legacy Wants Needs 38 6

7 Investment objective and risk profile Investment objective To provide income by investing primarily in a global portfolio of income generating securities Risk profile The value of your investment may fall as well as rise and you may get back less than you originally invested. The value of bonds and other debt securities may change significantly depending on market, economic and interest rate conditions as well as the creditworthiness of the issuer. Issuers of bonds and other debt securities may fail to meet payment obligations (default) or the credit rating of bonds and other debt securities may be downgraded. These risks are typically increased for below investment grade and certain unrated securities, which may also be subject to higher volatility and be more difficult to sell than investment grade securities The Fund may have a significant exposure to asset and mortgage backed securities (ABS and MBS). ABS / MBS may be difficult to sell, subject to adverse changes to interest rates and to the risk that the payment obligations relating to the underlying asset are not met The Fund may use financial derivative instruments (derivatives) and/or forward transactions for investment purposes. The value of derivatives can be volatile. This is because a small movement in the value of the underlying asset can cause a large movement in the value of the derivative and therefore, investment in derivatives may result in losses in excess of the amount invested by the Fund The value of equity and equity-linked securities may fluctuate in response to the performance of individual companies and general market conditions Emerging markets may be subject to increased political, regulatory and economic instability, less developed custody and settlement practices, poor transparency and greater financial risks. Emerging market currencies may be subject to volatile price movements. Emerging market securities may also be subject to higher volatility and be more difficult to sell than non-emerging market securities Investments in companies engaged in the business of real estate may be more difficult to sell and may experience increased price volatility due to changes in economic conditions and interest rates The Fund's asset allocation is actively managed. There is a risk that the performance of the Fund will suffer if the allocation to any particular asset class is low when that asset class is outperforming or high when that asset class is underperforming This Fund is aggressively managed, which may result in higher volatility of the Fund's performance and bigger differences between the performance of the Fund and its benchmark This Fund charges the annual fee of the Authorised Corporate Director (ACD) against capital, which will increase the amount of income available for distribution to Shareholders, but may constrain capital growth. It may also have tax implications for certain investors As the portfolio of the Fund is primarily focused on generating income, it may bear little resemblance to the composition of its benchmark Movements in currency exchange rates can adversely affect the return of your investment. The currency hedging that may be used to minimise the effect of currency fluctuations may not always be successful 39 FOR PROFESSIONAL CLIENTS / QUALIFIED INVESTORS ONLY NOT FOR RETAIL USE OR DISTRIBUTION 7