CPD: Why tailored retirement income strategies matter for advisers

11 Apr 2025

From Moneysoft

The value of tailored retirement income strategies is how advisers can best articulate that value to clients.

More than one hundred thousand Australians retire each year^[1], creating an array of scenarios to which financial advisers must match retirement income strategies (RIS). Effectively catering to each of these clients cannot be achieved using one or two generic RIS, as these could never represent the complexity of each individual. Instead, advisers must consider tailoring each RIS, leveraging data insights and regulatory shifts to deliver a service worthy of each client.

One such pending regulation may include the ability of retirees to spend their super on advice, giving advisers the opportunity to offer a premium service with less concern for cost. This service would avoid the common issues with generic RIS which often misinterpret post-retirement expenses and pre-retirement spending habits. Properly interpreting these factors can go a long way to winning new clients, but there are opportunities for advisers to go much further.

The introduction of the Consumer Data Right^[2] and open banking in Australia has given advisers access to the client’s full financial universe. And while these technological terms may spook the retirees of years past, future retirees’ digital literacy will only improve. This means advisers should prepare to impress with their technological prowess – beginning with open banking software.

Demonstrating the value of tailored retirement strategies

Generic RIS can be an effective part of the sales pitch but increasingly worthless in practice. This approach could never reflect the real-life complexities of an individual’s retirement and threatens to reduce the value of the client’s hard-earned superfund.

To illustrate the variety of retirees in Australia, below is a list of very basic retirement scenarios which may face advisers. Even within each of these six scenarios, there is an array of variables and unique financial challenges which can affect their eventual RIS. By having access to a client’s complete financial data via open banking and the CDR, advisers can provide more accurate and personalised advice.

Couple retiring together: Double the retirees means double the variables and associated challenges. In this scenario, the client(s) and adviser must balance dual income streams, expenses, and retirement aspirations. In dealing with the expenses of two rather than one retiree, there is an increased consideration towards longevity. Fortunately, all of these considerations can be easily integrated using open banking software, thanks to the CDR. Simultaneous retirements can be further complicated when the couple has a significant age gap or prior families to consider, as estate planning can become a tricky subject. Another consideration may arise if the couple have uneven super balances and must decide how they plan to share the sum. All these variables are incredibly difficult to include in a generic RIS, proving the value of a more tailored solution.
Early retirement, planning for a longer retirement period: The average age of Australians who retired in 2022 was 64.8 years old^[1], but there are many reasons to retire earlier than normal. Naturally, some people will have the funds to retire ahead of their peers, while others will retire early due to illness, injury, lack of work, or the need to care for someone else. Whatever the cause of early retirement, these clients must ensure their funds last throughout an extended retirement – whether their balance is desirable or not. Using open banking to analyse early retirees’ typical spending habits, advisers can find opportunities to cut back if necessary and plan out a manageable budget.
Single person retiring: Financial security can be of even greater importance to single retirees compared to those in a couple – the latter having a companion to help out financially. While solo living expenses can be easier to calculate and present in a generic RIS, this still won’t capture the details of an individual’s retirement lifestyle. If the retiree has no adult children or anyone to provide care in their old age, then the expense of professional help may be considered. Additionally, solo retirees may spend more to develop their social network through clubs and organisations.
Retiring and downsizing: This is where things can become even more complex. Downsizing retirees will require help with managing asset liquidation, relocation costs, and many financial trade-offs. The former is made far easier with a full overview of the retiree’s financial profile, as open banking details aspects such as mortgages and investments. Downsizing can also lead to an increased cash flow, allowing the retiree to invest the proceeds, creating another avenue for advisers to support the client.
Retiring and travelling: Jet-setting retirees can require a particularly unique RIS, as travel planning and budgets can be a very personal process. Prioritising travel throughout retirement presents challenges that go beyond finances, including health, logistics, and asset management while abroad. If the retiree seeks long-term travel, what is to be done with their expenses back home? Do they downsize at the same time to minimise the cost of keeping an empty home, or perhaps sell up altogether? Additionally, post-retirement travel can involve a lot of upfront expenses, leaving a smaller balance to invest across the retirement period. These considerations must be discussed in depth and understood on all sides before an RIS is complete. The last thing a retiree wants to worry about while travelling is their finances, so a tailored RIS can put them at ease while they make the most of their retirement.
Semi-retirement; reduced income: Perhaps the client is ready to slow down without giving their career away completely. Or maybe they need more time to care for a loved one while still earning a reduced income. Structuring a phased retirement while maintaining cash flow cannot be effectively achieved with a generic RIS. Advisers and their clients must consider how much the income can be reduced while maintaining a certain quality of living. A generic RIS could never predict the exact balance each client will strike between their career and their new-found freedom in semi-retirement. Therefore, tailoring a semi-retirement plan using open banking data will help to map out a phased retirement. This may take intervals of the client’s choosing, such as monthly, yearly or even five- to ten-yearly.

Common issues with generic planning

As described above, it is nearly impossible to predict the details of a given client’s retirement plan, and generic solutions will provide sub-par results. Generic RIS may have been of value to the adviser in years past, when tailoring a strategy took more time than it was worth. Fortunately, tailored plans are now much faster thanks to open banking software and provide a clear value proposition with which to win business from retirees. Therefore, there is little to no value in generic strategies for either party, especially as they provide no competitive advantage over the next adviser.

The first issue with a generic RIS is that they may predict retirement expenses will decrease during retirement which is often not the case. Many retirees embrace their newfound free time and seek new hobbies which increase their spending habits. The spending habits of travelling retirees can be expectedly lavish and must be accounted for in any tailored RIS.

A generic RIS also may not properly analyse the client’s pre-retirement spending habits. This is an issue quickly solved by open banking software which gives a complete picture of spending trends and transaction summaries. By analysing this data, advisers can predict the future needs of retirees and create a budget to suit such a lifestyle.

Most generic RIS also ignore complex scenarios such as age gaps between partners or those who choose to semi-retire. The income and spending habits of these individuals will not be linear from pre- to post-retirement and their strategy must reflect such complexity. By applying a more data-driven, personalised approach, advisers can achieve results that are more relevant to the client, along with concrete recommendations for the future.

How advisors can position this to the market

Financial advisers must become more than their job title suggests, providing empathy and patience along with clear guidance to retirees during a time of great uncertainty. As technology improves, the service provided by these professionals has the potential to expand significantly and retirees will come to expect more than a generic strategy for the future. It will take in-depth conversation to understand each client’s lifestyle and deliver a suitable RIS.

Accordingly, advisers must show the client how understanding current spending habits leads to more relevant, practical strategies. Naturally, retirees won’t simply give up their entire financial universe to open banking without first understanding how it will benefit them. Presenting the client with a comparison of generic versus tailored RIS may aid in proving the value of the adviser’s service.

A further tactic to convince the client of the value of open banking and a tailored RIS is to explain that expenses don’t always decrease in retirement. Oftentimes, expenses can increase as the retiree embraces their newfound freedoms and their lifestyle choices flourish. By highlighting this fact, clients can understand the importance of more carefully planning their RIS to reduce long-term financial stress.

Advisors must help clients see retirement as a dynamic financial transition, not merely the opening of a new bank account or fund. Positioning superannuation planning as a shift from collection to distribution is an important part of preparing any client for their retirement. This process must be taken seriously. However, many Australians don’t appear to pay much mind to how their own RIS will look.

According to a report by Australia’s largest independent corporate foundation, AMP, on the financial illiteracy of Australians aged 50 and over, 75% of respondents have not sought financial advice for retirement planning.^[3] It’s unclear whether this was due to a lack of concern, or an underestimation of how involved they must become in the process, but it’s clear that advisers must stress the importance of treating the process with appropriate care.

Extending the message to younger demographics

Once an adviser has mastered their messaging and the delivery of tailored RIS towards imminent retirees, their focus should expand to incorporate Australians aged 50 and under.

AMP’s report also found that “3 in 5 wish they’d started planning for retirement earlier in life.” This highlights the importance of retirement planning for younger generations too, where longer timelines mean open banking and tailored RIS will be of even greater importance when mapping out the future.

With a future-focused mindset, these younger people can be proactive about retirement planning and position themselves to potentially retire early or achieve a certain lifestyle sooner. But winning their business has become increasingly complex with the development of digital storefronts and marketing. Where previous generations may have found a financial adviser through word of mouth or proximity to home, future retirees are improving their digital literacy and advisers must develop their business accordingly. For example, if a given business isn’t appearing on Google for certain key phrases, it may experience a decline in new clients. As these younger generations approach retirement, website headlines such as ‘Tailored Retirement Income Strategies’ could be the difference between winning and losing new clients.

Other points of difference used to target younger demographics may include a strong social media presence and greater transparency – the latter being of utmost importance when discussing new technology like open banking software. Just as older generations are wary of new technology, younger Australians are increasingly aware of scams and the need to keep their data secure. In 2023, an Australian Government survey found that Australians aged 18-34 were “most likely to feel in control of their data privacy, but often find it is too much effort to protect the privacy of their data.”^[4] This presents an opportunity for advisers to take the pressure off younger clients, ensuring their data is secure while providing a tailored RIS.

The longer time horizons of younger clients also present a wider array of variables to consider in constructing an RIS. While a 40-year-old may envision a retirement full of travel and socialising, their reality and priorities are likely to shift as retirement approaches. This dictates that their RIS must leave room for change and growth while maximising wealth from the beginning.

Whatever picture the client would like to paint for their retirement, advisers should see younger generations as a big opportunity in retirement planning. Once the service has been polished for older clients, the framework can be molded to suit a younger audience and the adviser’s own future can be secured as well.

Positioning and open banking considerations

This article isn’t to say advisers should base their entire business around open banking and tailored RIS, lest they spook tentative clients who seek a simple toe in the water. Granted, not every retiree will be convinced of the value of tailored RIS and will be content with the generic alternative. Instead, a careful balance should be struck to entice both the financially savvy and the skittish.

By keeping messaging broad yet compelling, advisers can build a reputation for listening to clients’ needs and delivering the exact retirement they envision. This broad framing can help to maximise awareness and allow the business to steadily grow. An over-reliance on either side of the coin – tailored or generic RIS – will cut off any possibility of developing the other.

Summary

A tailored RIS will soon become the expectation rather than the added value of advisers, as awareness of open banking software increases with each generation of retirees. But until such time, advisers have an opportunity to create a competitive advantage to win and retain new clients.

Whether that client comes as a couple, a solo retiree, a travel lover, a downsizer or a unique combination of each scenario, the adviser must provide the most suitable and accurate picture of their retirement.

The generic alternative to a tailored RIS presents several issues which should be explained to prospective clients, all concerning misinformed assumptions about a person’s lifestyle and retirement plans. To avoid the delivery of a misinformed RIS, advisers must develop empathy and understanding of each client’s unique situation and form a strategy which reflects them.

Once the framework for a tailored RIS is in place, advisers would be wise to extend this towards a younger demographic, giving their business the best opportunity to enjoy longevity and security. Younger clients should remain increasingly accommodating towards the security and accuracy of open banking software and the RIS it can deliver, so long as the service is flexible to changes as they age.

This advice is best applied in moderation, as retirees seek control and certainty around the use of their nest eggs. By presenting open banking and tailored RIS as an option rather than the one correct direction, advisers can welcome new clients into a flexible and welcoming partnership. From here, conversations around retirement planning may take any size and shape, such is the unique nature of each retiree.