Vanguard launches new Retirement Income Builder tool for advisers 


Rebecca Pope

Vanguard Australia has launched the Retirement Income Builder (RIB), an innovative new tool for advisers to deliver client investment and drawdown strategies for retirement.

The RIB tool forms part of Vanguard’s broader commitment to building a digital ecosystem to help advisers streamline their client service offerings and create efficiencies in their business models.

“Following the introduction of our Vanguard Portfolio Builder tool, we’re excited to further add to our digital toolkit for advisers with the launch of Vanguard’s Retirement Income Builder tool,” said Rebecca Pope, Head of Intermediary at Vanguard Australia.

“We recognise the increasingly critical role that effective technology plays in enabling advisers to deliver more efficient and scaled advice to retiring Australians.

“Over 260,000 Australians retire each year and face the difficult trade-offs associated with creating a sustainable retirement income stream. The RIB tool is purpose-built to integrate seamlessly into the advice process and provide clients greater certainty in what can be an uncertain phase of life”.

The RIB tool takes into account a range of investment factors including client goals, spending glide-paths, tax implications and the age pension to forecast income and wealth in retirement.

“In discussions with advisers, it became apparent that existing tools were either too simplistic or overly complicated. The RIB tool has been designed to offer the right level of complexity; it is easy to use and client friendly while incorporating enough considerations to model retirement scenarios effectively,” said Ms Pope.

A total returns approach in a low yield environment

Traditionally, many investors have used an income-focused approach to meet their retirement needs, primarily relying on the interest and dividends generated by their investments to support ongoing expenses.

However, with falling distributions and interest rates likely to remain at historical lows, income-focused retirees will have to greatly elevate their portfolio risk to meet most income needs. This can translate into portfolios being 100 per cent equity allocated and reaching a level of risk that is generally incompatible with retired investors and their long-term interests.

The RIB tool provides an alternative by incorporating a total-returns approach to help advisers construct client portfolios.

Instead of focusing solely on selecting assets with the yield to match a client’s spending objectives, the RIB tool allows advisers to assess their client’s goals and risk tolerance, set asset allocation at a level that can sustainably support spending requirements and use capital returns when necessary.

“The RIB tool brings the total returns approach to life by enabling advisers to apply it simply and practically to their client’s individual circumstances,” said Ms Pope. “It will help advisers use both the income and capital growth elements of a portfolios to guide clients through different retirement scenarios”.

Bridging the advice gap

According to recent research by the Financial Services Council, there currently exists a gap between those who could benefit from advice and those who actually receive it.

More stringent measures to protect client interests, while very important, has played a role in increasing the cost and complexity of providing advice.

“The advice landscape is not what it was five years ago,” said Ms Pope. “Increasing regulatory requirements and competing demands are challenging advisers to better streamline their operations. Adopting advice technology can simplify the delivery of the more complex aspects of financial planning, while at the same time help to keep costs down”.

“As we reflect on our now 25 years in Australia, our business has grown with the support of like-minded advisers who put the interests of investors first. We will continue to add value to this partnership by first and foremost delivering high quality investment management, as well as relevant research, client education and technology solutions to enhance the delivery of affordable, quality financial advice.”

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