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Hi I’m Chantal Giles, Head of Wealth for BlackRock Australasia.

In Australia, what have you been doing to help create a pension solution that works for both savers and spenders in the run-up to, and the years beyond, retirement?

The savings side of the equation has been the key focus for the Australian wealth management industry since the super system was established, with around AUS$3.7 trillion in assets¹ now managed on behalf of Australians who will soon commit 11.5% of their salary to the system each year. With assets locked away until savers reach age 65, pension funds can take a long-term view with their investment horizons and look beyond traditional listed markets, and the introduction of an industry-wide performance test has increased focus on areas like alternative assets that can help funds generate an edge over the competition.

Now the focus is shifting to post retirement. Recent regulatory changes require super funds to identify and deliver on the retirement income needs of members, as well as ensuring they have access to affordable financial advice to navigate their retirement options.

With Australia’s super industry projected to grow to AUS$7 trillion, 55% of which will be held by retirees, creating a ‘one-size-fits-all’ solution is a challenge given the differences in age, income and financial literacy across member demographics.

BlackRock works with our clients in Australia to navigate these changes and challenges, recognising that everyone’s retirement journey is a highly personalised pathway.

From encouraging advisers to think about wellbeing in their retirement advice, to working with advice groups on building retirement income portfolios, to providing technology solutions that manage portfolios at scale – we’re engaged with our partners to help build a robust retirement future for investors.

What are you working on with clients at the moment?

BlackRock’s strong experience in portfolio construction and risk management has been at the core of client relationships during the challenging markets of the last few years and the new regime of high volatility and uncertainty.

We’re working with our clients in a few different ways - firstly, by evolving how portfolios are built through model portfolios. Adapting to the current markets has been important, ensuring we can be granular in our approach to asset allocation and incorporating alternatives such as real and private assets.

Secondly, we’re enabling better risk management and governance across the portfolio management value chain, from the fund/mandate level with Aladdin Enterprise, to the client level with Aladdin Wealth. Scale, efficiency, and robust governance are key topics of interest to Australian and New Zealand wealth clients.

Lastly, super funds and wealth managers are looking to engage their clients in new ways, evolving beyond basic communication to provide additional support services, and different approaches that focus on psychological as well as financial wellbeing. We spend time with our clients sharing best practice across BlackRock’s global client base, that may be useful in developing client engagement strategies.

Overall, there is undeniable alignment in the industry to ensure investors are best placed for the next step on their retirement journey.

What about the next frontier?

The Australian industry is evolving to meet both regulatory requirements and the changing needs of clients.

The need for personalisation at scale continues to grow, both in terms of investment preferences and individual needs during the retirement journey. Technology will continue to evolve to enable this trend. Aladdin Wealth is already making a huge impact in the local industry, helping organisations build and manage individualised portfolios at scale.

Personalisation will become even more important once super funds are obligated to offer qualified advice to members.

For retirees to live the retirement they want, understanding how to spend their hard earned savings with confidence is also of prime importance. Recent partnerships between super funds and life insurance companies are aiming to provide solutions around longevity risk that solve for the goal of income consistency.

In retirement more than ever, investors are sensitive to market moves affecting their potential income. Managing retirement assets requires a disciplined risk-first mentality which BlackRock delivers through our Whole Portfolio partnerships with clients, managing both accumulation and decumulation assets.

Evolution in the retirement income space is something the industry needs to do collectively. Product and technology innovation will enable the creation of retirement solutions, regulation will support and legislate the needs of investors, but only as a collective can the industry build confidence and trust with investors who seek a comfortable retirement, with peace of mind that their assets are safe and working for them.

¹ Source: Association of Superannuation Funds of Australia, as of end December 2023

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