David Coombs, fund manager of Rathbones' Multi-Asset Portfolio Funds, confirms: “Time horizon is critical to understanding the appropriate level of risk for a client to take.”
He acknowledges: “In the accumulation phase of a portfolio, the only goal is capital growth to grow the ‘pot’ as large as possible.
“Decumulation strategies can be more varied, but often there is a need for a regular and sustainable income. Ultimately, the overarching goal is not to run out of money.”
That fear of running out of money in retirement is often at the forefront of clients’ minds, according to Verona Kenny, head of intermediary at Seven Investment Management.
She warns: “Once clients move into decumulation, their pots start to erode as income is withdrawn, and there is an increasing risk of running out of money.”
Rethinking the asset mix
But Mr Coombs makes an important distinction: “Decumulation does not necessarily mean lower risk though, especially as people retire younger and live longer.”
He urges that, for this reason, there needs to be a rethink.
“We may just need to alter the asset mix to focus on income, should that be the objective,” he adds.
Mr Coombs explains how this plays out in his own multi-asset funds.
“In the case of our Rathbone Strategic Growth and Rathbone Strategic Income funds, the risk level is equal but the difference is that with the Rathbone Strategic Income fund – which we would see as more of a decumulation-type strategy – we aim to provide a regular natural income, thereby limiting the need to draw on capital,” he says.