Advisers urged to maintain long-term view of investments during current market volatility

Colonial First State (CFS) has called on financial advisers to help their clients navigate the current period of market volatility.

Speaking at a recent event, CFS CIO Jonathan Armitage said events such as the pandemic, Ukraine crisis, inflation and interest rate rises, and supply chain disruptions have all impacted superannuation performance.

“Our primary message to both advisers and members is to maintain a long-term view of investments," Mr Armitage said.

“Our research shows that if members had, for example, moved money from shares and bonds to cash during the GFC period, their super balance would have been significantly lower today in comparison to the amount they would have accumulated had they stayed invested in their original portfolio.

“While it might feel tense during periods of market volatility, markets do recover and it’s important that members think about taking advantage of that."

Mr Armitage also discussed retirement at the event, noting that the recent period of low interest rates, income-generating assets had been difficult to find, despite being "critical" in the retirement phase.

“While we’ve seen some sharp adjustments from a return perspective, we’re now starting to notice fixed-income securities produce returns which allow retirees to have a reasonable level of income,” Mr Armitage said.

“There will be bumps along the way but we’re seeing a normalisation of interest rate policies feeding into fixed-income securities, giving advisers an opportunity to consider resetting client portfolios to take advantage of that."

Meanwhile, CFS executive director of technical services, Craig Day, addressed a recent concern by super members that they need more support on their age pension during their retirement years.

A white paper commissioned by Link Advice — part of Link Group’s Retirement and Superannuation Solutions (RSS) division — this month found that almost four out of five retirees want support as soon as they are eligible.

Of the almost 1,000 Australians aged between 65 to 75 who were surveyed, 70 per cent said they want direct support from their super fund.

“Termed longevity risk, this is where people potentially outlive their life expectancy and exhaust their retirement savings,” Mr Day said.

“In this case, it’s important to remember life expectancy figures are averages which means half the population will outlive their life expectancy. Life expectancy also generally improves over time with advancements in health and medical science. A good adviser will factor all this in when determining retirement income levels, to minimise the risk of their client outliving their savings.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.