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In the Allianz Retire+ five phases of retirement, wedged between phases three, ‘liberation’, and four, ‘reorientation’, comes ‘disenchantment’. It is often the most challenging and important for an adviser to manage. In a webinar last week (September 8), Alex Brown, Allianz Retire + senior business development manager, chaired the third in a series for advisers called ‘Crucial Conversations’ – ‘Life Changing Decisions, Best Made with Good Advice’.

A common element between the phases, according to the panelists, was that while the financial part of advice was crucial for the client’s wellbeing in retirement, so was the non-financial parts. Another common element, of which most advisers will be aware, is the importance of starting the discussions early in the process and to reassure clients to stay the course with their investment strategies.

Sam Mantarro, a director of Trilogy Private Wealth, who specialises in transitions to retirement and managing asset decumulation, said: “Financial goals are far-and-away the easier to quantify and communicate than non-financial goals. There is a myriad of tools… What is much harder is dealing with emotional goals.” He was talking about the second phase; ‘anticipation’, which is still in pre-retirement. He said that some people could lose purpose in retirement. “I suggest you maybe don’t want to fully retire. ‘Retirement’ is a bit of a dirty word at this stage. You should retire at whatever age is appropriate to you. It’s a step into retirement rather than a jump into it,” he said. “You should talk to other people, understand what challenges they had and importantly make sure you have conversations with your partner… You need to be both on the same page.” The five phases are:

1. Imagination: six-15 years before retirement
2. Anticipation: up to five years before retirement
3. Liberation: retirement day and the year after, often called ‘the honeymoon period’
4. Reorientation: two-15 years after retirement, and
5. Reconciliation: usually 16-plus years after retirement but can be sooner.

Cate Americano, director of Inspiration Café, a business and life-coaching company, said the first phase was about the ability to stretch the client’s imagination beyond the current reality. “We get them to dare to dream big,” she said. “To get them to define their version of happiness and success is really important. They start to think about creating a life by design rather than by default.” The two tools she uses are to define personal values and the ‘Wheel of Life’, a diagram which encompasses: business or career, finance, health, family and friends, romance, personal growth, fun and recreation, and the physical environment. “Values are my absolute favourite because they are so powerful,” she said. “It’s how we make our large decisions. When your values are really clear, the decisions are easy. It works at any age or any stage of life.” Mantarro said that while it might be too early, in the first phase, to talk about specific products and risks, the adviser could set some expectations about how much the client was likely to have to spend in retirement. With respect to goals, Brown pointed to research which showed that people were more likely to achieve them if they write them down and shared them. If ‘retirement’ is a dirty word to some, it can be re-phrased as the ‘next chapter’ or ‘next gig’, as Americano calls it. She said: “I know a great adviser who sends his retiring clients a personalized business card, which is very clever as it addresses the identity piece. You can easily be the CEO of your own life.” The comes ‘Liberation Day’, the start of the honeymoon period. But Allianz Retire+ research (from a survey of 702 retirees and prospective retirees taken pre-pandemic in 2019) shows that only 33 per cent feel secure in the event of an economic downturn and 21 per cent fear a market downturn which can cause losses. A poll of advisers taken during the webinar provided an illustration of the impact of the pandemic on this demographic cohort. Redundances and/or ill-health of a family member had forced clients of 26.3 per cent of advisers to retire in the last 12 months, while 28.9 per cent of advisers had clients who retired early by choice in the same period. A total of 39.5 per cent of advisers had clients who deferred their retirement and only 57.9 per cent had clients who had told them they would retire as planned in the next 12 months. (Note, advisers had clients in more than one category.) With the honeymoon over, the round-the-world holiday taken, the home downsized and moving through disenchantment, which may mean a return to part-time work for one or both (“for some extra money or to get away from the house or spouse”) the reorientation tends to be where the big decisions are made and where the value of advice is crucial. This is also where the risks become evident. According to an August 2021 survey by PIMCO, a sister company of Allianz Retire+, 65 pe cent of retirees rank health risk as most important, followed by 58 per cent for market risk, 46 per cent for longevity risk, 42 per cent for political risk (changing regulations) and 39 per cent for other personal risks.

Sheena Stow-Smith, the managing director of specialist adviser AdviceLink, which helps people to deal with various government agencies, such as CentreLink, said she saw a lot of retirees who felt frustrated and confused. “Retirement is such an anticipated point in people’s lives, and no-one expects such difficulty when they are trying to understand and access government benefits,” she said. “There’s a lot of time involved in understanding the system and the application process. It causes a lot of fear and anxiety.” Despite the finality of the ‘Reconciliation’ phase, when clients deal with their legacies, told an uplifting story of an elderly woman client, who had children who were already on the age pension and with adult grandchildren. “It was quite a large discussion group,” she said. “For the client giving away her capital really did impact on their lives… The whole intention was to give a lot of the money over to the grandchildren, so we used things like insurance bonds, so the kids in between weren’t disadvantaged.” The complex strategy, including the establishment of a special disability trust for one of the grandchildren to allow continued access to some government services, took more than five years to plan. “But I love the idea that clients enjoy seeing their families use their money and benefit from what they have been able to achieve,” she said. “In this case they also used some money to have a family holiday, which was also a great way to spend it from a CentreLink point of view. It’s important for people to enjoy life. It’s not just about the money in the bank account.”