At a roundtable discussion on retirement income, financial planners and industry experts said the reporting of fees and performance data had created lead tables which had shifted the focus from achieving the right outcomes for the individual client.
“We’re going to see published the top performers, bottom performers, highest cost funds, lowest cost funds but it’s not supporting the outcome that we’re after which is giving people transparency when it comes to what their income is going to be in retirement,” said one delegate.
Nigel Stewart, Finsia fellow and chairman of boutique advisory group Stewart Partners, said there needs to be a greater focus on meeting the risk parameters, needs and outcomes of the client.
“If our goal is outcome-focused we should be maximising the probability of achieving outcomes, tailored to the individual client, not lead tables, not standard deviation, not averages; we’re focusing on the wrong outcomes,” said Mr Stewart.
Former QIC managing director of lifecycle strategies and current Griffith University finance professor, Michael Drew, expressed similar concerns.
“Finsia research shows that you can have a second quartile performing fund that will give you a higher dollar balance at the end than the top quartile performing fund, because of the sequencing of returns,” said Professor Drew, who is also chair of the editorial board of quarterly Finsia journal JASSA.
Mr Stewart said while there is a great deal of ignorance in the industry, by educating policymakers, the focus could be driven to what was most important and away from asset allocation where sequencing risks would result in a variety of issues.
“What we should be doing as professionals is educating other professionals, educating APRA, ASIC, our friends down in Canberra and the whole industry and the public,” he said.
APRA is aware that the regulation is focused was on the wrong outcomes, but the government body is unsure of how to resolve it, he added.
