With these two parts complete, we can move forward with what investments will help the client receive the additional income. The investment will depend on the client’s need for income, risk tolerance and time frame. At this point, I assume the role of an educator and provide the client with the options available to curate the best solution for their individual situation.

I previously sat down with a couple in their 40s who were looking to plan ahead for their retirement, accounting for expenses, future income and their future inheritance to their children, among other things. For this couple, I recommended using equity funds that would pay a dividend and/or diversified bonds that would provide a steady stream of income. During our conversations, the woman in the relationship voiced that she was open to taking a bit more risk in order to have income during retirement and have a legacy to leave behind. I found this interesting because in a recent survey from Frost we found that men (56%) are more comfortable taking some financial risk than women (36%). Like this woman, I’ve seen more and more clients taking initiatives to educate themselves on investments and trusting the level or risk advised to them by a financial professional.


Dick Pfister, Chief Executive Officer
Alphacore Wealth Advisory
La Jolla, California
$518 million in assets under management and assets under advisement

Retirement income planning is a lot like building a 100-piece puzzle where we inventory and understand all of the client’s “pieces” including their individual investor attributes (e.g., net worth, risk tolerance and behavioral biases) and financial goals (e.g., spending policy, gifting policy and legacy). Without first evaluating and organizing the pieces of the puzzle, we hinder our ability to bring the puzzle to life.

Complicating the puzzle’s completion is the state of the fixed-income markets. With 10-year Treasury bond yields bouncing off historical lows, it’s as if you have to start looking underneath the couch cushions for extra income. Because forward-looking returns for bonds and equities are uncertain, we try building a diversified portfolio that incorporates forward-looking return streams not dependent on stocks and bonds.

We diversify our clients’ portfolios by borrowing elements from the endowment model—and by constantly evaluating investment opportunities across a changing landscape. We scan the universe of private investment opportunities, from credit to real estate to equity, and alternative investment strategies—both liquid and illiquid—including business development corporations, long/short strategies and merger arbitrage.

Our goal is to find investment opportunities that exhibit an attractive forward-looking risk-reward profile that’s presumably uncorrelated to stocks and bonds. These investment opportunities are out there, and we perform extensive due diligence to find them.

Specifically, we look to underweight passive equity and overweight tactical equity. We incorporate actively managed alternative strategies (like merger arbitrage) which have the potential to produce positive total returns during a pullback similar to the fourth quarter of 2018. And private-credit strategies have the ability to generate high yield-like cash flows with underlying credit quality much different than high yield. We believe these strategies in a diversified portfolio have the ability to help clients generate the returns needed to maintain a comfortable retirement.

These opportunities won’t be found if you exhibit a “stock-and-bond bias.” When the above-mentioned investments are added to a portfolio of stocks and bonds, the result is a significant increase in the portfolio’s durability and a significant decrease in sequence risk. And that helps increase the client’s likelihood of achieving their retirement goal.

Finally, there are two critical variables to completing the retirement income puzzle: a client’s planned annual withdrawal rate and the minimum annualized total return needed to realize their ideal retirement.

In summary, this is how we build the puzzle for our clients’ retirement income planning needs. But the job is never done because individual investor attributes, along with the ever-changing nature of the investable universe, must be managed on an ongoing basis. One tool we rely on is our proprietary portfolio analytics tool, factorE, to periodically stress-test client portfolios and to always maintain realistic expectations.

Unfortunately, investors in retirement are never best served setting it and forgetting it. Fortunately, they always get to build another puzzle.

First « 1 2 3 » Next