Investment management firm PIMCO together with its parent company Allianz have established an Australian-based taskforce aimed at offering innovative retirement solutions to the Australian market in circumstances where it believes existing products are severely lacking.
According to PIMCO, the taskforce, announced today, is finalising detailed market testing to inform the development of the retirement solutions and is comprised of subject matter experts derived from around the globe from Munich, Minneapolis, and Sydney.
It said the taskforce was being overseen by PIMCO Australia and New Zealand head, Adrian Stewart and sponsored by Günther Thallinger, member of the board of management of Allianz SE, Investment Management.
The PIMCO announcement said analysis by the taskforce of the Australian market, had concluded that the existing suite of retirement-oriented investment solutions was severely lacking in offering clients and advisers an ability to adequately manage the risks they faced when trying to achieve their retirement objectives.
“One key observation is that existing investment offerings require retirees to choose and accept full market participation or to choose certainty, with lower returns and no market exposure,” the analysis said. “They believe the next generation of retirement solutions need to consider the ability to mix certainty with market participation.”
Commenting on the taskforce establishment, Stewart said the Australian marketplace had a long list of market failures by entrants who had built and launched products in an attempt to solve the retirement dilemma.
“Our assessment is they’ve all failed for very different reasons. The barriers to entry to manufacture products in this space are extremely high, for all the right reasons, and there are very few groups that will have the scale, expertise, patience and distribution model to be sustainable over the next 25 plus years,” he said.
“I know 25 years is a long-time horizon to be framing this segment, but we should be thinking about this as a long-term viable solution. If you’re going to be a solutions provider to retirees you have to be thinking in that mindset of 25 to 50 years because these are not short-term commitments.”
Stewart said it was his view that the financial services industry needed to try harder and take a longer-term perspective when building solutions.
“The past 25 years have all been about innovation in accumulation, the next 25 is all going to be about deaccumulation. The industry needs to start talking about risks other than longevity such as sequencing risk and accumulation risk.”
