Skip to main content

Stewart, 64, of Port Alberni, B.C.: Virtually all advisers say that in retirement you should split your investments between equity-based and fixed-income vehicles. My question is: if you are retired and have a company pension that more than covers your needs, does it really matter if you go 100-per-cent equities?

*****************

Ms. Birenbaum has worked in financial services for over 25 years within the Credit Union, full-service brokerage and independent Financial Planning industries

Rona Birenbaum is a certified financial planner who founded Toronto-based Caring For Clients in 2000.

Stewart, you’re correct that one size doesn’t fit all. Asset allocation should be driven by:

· investment objective (growth, income, safety, blend);
· rate of return required to meet the objective;
· time horizon (For retirees there are two: how soon will withdrawals be needed; how long will you live);
· other sources of retirement income (pensions, real estate divestiture, inheritance);
· tax considerations;
· investor risk tolerance.

If you have a high risk tolerance and your objective is to grow the portfolio to maximize your estate over the long term for beneficiaries, then an all-equity or equity-fund portfolio can make sense.

Before recommending an all-equity fund asset mix, our firm would prove this premise through a financial projection analysis that considers what could go wrong. As an example, if either of the following occurred during an equity bear market, the results could be problematic:

· reduction in your pension benefits due to corporate hardship (e.g. Nortel);
· significant off-budget requirement, such as the need for extraordinary medical expenses.

Note also: Financial regulators are now taking a protective approach in relation to seniors and asset allocation (IIROC and MFDA consider anyone over age 60 to be a senior). Protecting seniors is a priority in their oversight and complaint review activities.

As an adviser, I would have to:

· make a very clear case why an all-equity fund allocation is appropriate for someone over 60, even in your generous pension-income circumstance;
· clearly document the full financial planning case and your desire for and understanding of a 100-per-cent equity-fund allocation;
· require you to sign off on all aspects of the strategy.

This would be for the benefit of the compliance officers of my investment dealership, but also to protect me should you have a change of heart in the event of a stock market crash. Regulators start from the position that seniors are vulnerable and unsophisticated – advisers must tread very carefully with their advice.

Report an error Editorial code of conduct
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.