The implementation costs of the Future of Financial Advice (FOFA) reforms come at the expense of product development, in particularly post-retirement products, according to consultant and former head of Asgard Wayne Wilson.
"I don't think we have the right products for retirees; we certainly don't have the right investment strategies for retirees," the Hunts' Group senior consultant told InvestorDaily.
"We don't seem to have the right balance between protecting their assets so that they last and providing enough growth in them so that they don't run down so fast."
Wilson said many retirees were too exposed to equities during the global financial crisis (GFC), which saw their investments drop significantly when prices started to plunge.
"There is the thought of somebody who just retired during the middle of the GFC to see their retirement go down by 30 or 40 per cent overnight," Wilson said.
"They spent 30 years building it; a few nasty days on the stock market and 40 per cent of it goes out the door and it hasn't come back.
"Those people find themselves stuck drawing down from a pile that is 60 per cent of what they thought they were drawing down from. And they can't stop for two or three years until the market comes good."
Wealth management companies are keen to develop better post-retirement products, but the current wave of regulatory change makes it hard for companies to allocate budgets to these projects, Wilson said.
"There is time and development that they like to do on products, but they can't spend money on that if they have to spend money on FOFA," he said.
Wilson said wealth management companies are keen to take a closer look at portfolio protection strategies.
"There is a lot more thinking about that but they haven't found a cost-effective way of doing it," he said.
"The solutions I've seen just take too much off performance and they just take you back to a rate that is not that much different from taking a term deposit or a 10 year bond or something."
Wilson argued that to make the products viable, providers needed to get the fees under 100 basis points.
"I haven't seen that yet," he said.
