There is a broad approach among investment advisers that as a client becomes older they should be advised to become less risk orientated in their investments. This is partly driven by the thought of “how would I advise my parents?” and partly driven by fear of the Financial Regulator finding fault with an adviser’s investment process. But how should the elderly invest?
Since we would always want to care for our own kin, therefore why should we treat elderly non-family any different?
By paying increased attention to their vulnerability, however, are investment advisers doing the elderly more harm than good by only just recommending cash or fixed interest options, as most advisers actually do. Is this old style, old age, approach a rather simplistic tactic as many advisers do not want to have to deal with stressed elderly clients worried about the stock market roller coaster?
Don’t get me wrong, I am not, for one, recommending a sea change in approach but I do wonder if the financial advisory community has unwittingly become almost condescending to many of its senior citizens or overlooked the need to revise its thinking in line with changed macro economics? By assuming that they will either become too stressed about investment risk or cease to be intelligent when they get into their 60s and onwards, are we removing, in some cases, appropriate investment products for their specific needs in these changing times? Who is to say that the elderly invest less shrewdly?
Now I realise that this perspective may be deemed to be investment advice heresy by many of my peers but the fact remains that because someone is elderly doesn’t mean that they have stopped living or does not require a minimum rate of investment return from their investments to meet their future needs. Even a well meaning label by the Financial Regulator shouldn’t remove the need to discuss the full range of investment options rather than, as it seems to happen, start and end with cash-based or fixed interest instruments.
Of course, the rationale of increasing an investment portfolio allocation to less risky, less volatile assets as one gets older seems quite understandable, even if you leave aside the emotional issues. As individuals edge towards being immediately pre-retirement investors only to become post-retirement investors, their ability to earn their way out of a stock market fall diminishes considerably, as does their ability to outlive the long term effects of a market decline.
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