Different profiles of portfolio insurance can be delivered in different ways - for example, by combining an asset-based strategy with a basket of autocalls, capital protected funds, or an alternative risk-based strategy, such as risk parity.
The specificities of these different combinations will vary widely - and each will have product specific advantages and disadvantages - but this is an example of the range of protection-style strategies for advisers to choose from to incorporate into a decumulation portfolio.
Applications
As advisers map out their centralised retirement propositions, it’s necessary to consider:
- How to assess suitability in retirement.
- The expected withdrawal profile (pot size, withdrawal rate, and time horizon) for a single or multiple range of retirement goals.
- The most appropriate liability-relative strategy.
When considering which liability-relative strategy is appropriate, advisers should determine whether or not there is a need or preference for hybrid solutions, and what solution will be most appropriate for a client based on life expectancy, capacity for loss, wealth level, service level and a trade-off between customisation and cost (value for money).
Henry Cobbe is head of Copia Capital Management
