New tool gives clients a visual of their retirement

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Advisers helping clients to prepare for retirement can now simulate how their nest egg will fare in both upside and downside markets.

MLC have introduced a tool that will enable advisers to add in market shocks to help stress test clients’ retirement savings or income under different scenarios. This was an issue that Challenger Retirement Income chairman Jeremy Cooper addressed in his SMSF speech at the ASIC forum yesterday, when he said SMSF clients in particular were not factoring in the price of volatility or ‘investing for the long term’.

The MasterKey Investment Protection Simulator from MLC gives clients a visual representation to clients of exactly what retirement risks can do to their life savings, says MLC Retirement Solutions General Manager Andrew Barnett. “It provides a range of projected account balances when looking at capital or the probability of meeting an income goal depending on different circumstances.”

“Advisers know retirement outcomes can vary significantly due to risks such as longevity risk, sequence risk, market risk and timing risk. However, it’s often hard to clearly describe this to clients in a way that also demonstrates the importance of setting retirement strategies including risk mitigation.

“We saw the need for a tool that not only gives advisers a way to easily explain the complexities of retirement risk to their clients but that is also smart enough to take into account a range of different scenarios rather than just assuming average market returns."

Advisers input details into the simulator such as salary, super balance, retirement goals and current contributions. The simulator then allows advisers to assume up to two market shocks to show the possible impact to their client’s nest egg.