From November 1, 2023, the existing IBOSS ‘Income MPS’ range will be renamed ‘Decumulation MPS’.
The product itself won’t be changing, and the underlying management and investment philosophy will also remain the same. In addition, we will be releasing new material over the coming weeks and months ahead that will aid advisers and planners in the retirement income advice space in which our newly named Decumulation MPS excels.
The Decumulation MPS is already available on 15 different platforms, is risk-rated by EValue and is visible on an abundance of third-party industry research tools, such as Financial Express (FE).
What does the word ‘decumulation’ mean?
We are all familiar with the word accumulation, where money is saved and invested to build wealth over time. Decumulation is essentially the opposite and refers to the process of gradually spending or withdrawing money from accumulated investments, most commonly during retirement, to cover expenses such as the cost of living, travel, or other financial needs.
Decumulation is a crucial financial strategy for retirees to make sure they have enough money to support themselves after they stop working without running out of funds and to maintain quality of life during retirement.
Why are we changing the name of the range?
IBOSS have the history and experience of managing an income specific portfolio dating back 15 years, via an advisory solution. Due to adviser demand for the kind of defensive characteristics that the portfolio exhibited, the range was expanded in 2017 to cover a broader range of risk outcomes across multiple portfolios and was made a discretionary service; known as the IBOSS Income MPS.
Whilst targeting income funds and supporting regular withdrawals are fundamental key features of the range, we have concluded over the past twelve months that the title ‘Decumulation’ captured the essence of the portfolios more appropriately, and addressed the client demographic that the range would be most suited to.
How did we reach this conclusion?
In Q1 2023, the FCA began conducting a thematic review of retirement income advice and aim to publish an impending report setting out their findings during Q4. Therefore, at the beginning of the year, we began conversing with advisers about their clients that sit within the ‘at retirement’ stage of their investment journey to ascertain how they saw this area of the market within their own business. More precisely, we wanted to know what kind of investment vehicles they were considering and what characteristics they would need to exhibit.
It quickly became apparent that our existing portfolio range, formerly known as ‘Income’, could be an excellent fit for many of a particular cohort of an adviser’s clients. We consulted with multiple advisers and industry figures about the potential name change to ‘Decumulation’, and it was collectively agreed that this title would be more appropriate to describe the range’s overall service from a consumer perspective.
While the word decumulation may be less familiar to some clients, our products are only available through the adviser community, so the range’s title and intricacies will always be fully explained. In our opinion, and for the foreseeable future, no artificial intelligence or software tools will be able to replicate the crucial ongoing discussions between the adviser and their clients. This will remain a complex investment area, and their professional know-how, soft skills, and expertise will remain imperative.
What type of clients would benefit from the IBOSS Decumulation MPS?
The type of client who may benefit most from this investment approach would be one where volatility and drawdowns are some of their highest priorities as opposed to ones where potential future capital growth is the key driver of their investment needs.
Historically, in the era before the Pension Freedom Act, most people bought an annuity, but all that changed following the new legislation. Now, most people use some form of perpetual investment vehicle(s), meaning they will remain invested in various risk assets for the rest of their lives.
From the period following the Global Financial Crisis until December 2021, and due in no small part to the actions of the world’s central banks, we lived in an era of super-low, or even negative, interest rates. This meant a search for yield in bonds where often virtually none existed. This had the effect of driving some people into assets where the risk/return profile was poor, and their future returns were predicated on the ‘lower for longer’ era becoming ‘lower forever’. At the same time, growth stocks achieved the greatest total returns rather than the more value-orientated and dividend-paying ones.
In short, this investing backdrop, which we think will in time be considered anomalous, was a perfect storm for multi-asset income portfolios.
What does the Decumulation MPS do differently from the other IBOSS MPS ranges, and why would an adviser choose to use it for their clients?
Our Decumulation range has an even greater focus on what we class as defensive characteristics. To quantify our relative defensiveness, we use several well-known industry ratios. We emphasise volatility, max drawdowns, downside risk and beta to the respective benchmark. All of the IBOSS MPS ranges have a strong track record in these ratios.
Still, for decumulation clients, there is a greater imperative to reduce the gyrations of absolute and relative market movements. One attribute where the range absolutely does not differ from the others is that of a truly diversified pool of assets, be that by geography or investment style but within the confines of more income-orientated funds.
IBOSS has a demonstrably strong track record of over 15 years in this space, with the characteristics required to enable clients to take the income level they feel they need to suit their circumstances. Furthermore, IBOSS was founded by financial advisers, so possess first-hand knowledge and experience of clients’ demands when it comes to their retirement expectations.
Aside from a client at the retirement age of their investment journey, it may be that the highlighted characteristics will also suit other clients who would perhaps appreciate the more defensive emphasis of this range. As always, we defer to the adviser to ascertain their client’s most appropriate investment option.
What else is included in the service for clients and advisers?
As a team, we offer a first-class service, not simply an investment product. We are proud to say that we have won several industry awards over the last few years for our service and communication.
The portfolios are monitored daily and rebalanced quarterly, but the team have the ability to make intra-quarter changes should they deem them necessary. Clients also have the option to receive our free, white-labelled quarterly communication which is included in all four of the IBOSS MPS ranges. We strive to ensure our client facing material is jargon-free, making it easy for clients to engage with, whilst creating a level of client involvement that makes them feel part of their investment journey, even after they have retired.
As with all the IBOSS products and services, advisers have access to the investment team, a feature we have always received excellent feedback on since our launch in 2008. Throughout a client’s investment period, there will undoubtedly be times when markets generally struggle to produce the required returns and periods when the growth-style funds outperform the more value-orientated ones. It’s during these more difficult periods when the value of access to the investment team and a knowledgeable wider team becomes increasingly important.
Want to find out more?
Click here if you would like to discover more information regarding our newly named Decumulation MPS or to set up a meeting and discuss things further, please contact our Head of Business Development:
This communication is designed for professional financial advisers only and is not approved for direct marketing with individual clients. These investments are not suitable for everyone, and you should obtain expert advice from a professional financial adviser. Investments are intended to be held over a medium to long term timescale, taking into account the minimum period of time designated by the risk rating of the particular fund or portfolio, although this does not provide any guarantee that your objectives will be met. Please note that the content is based on the author’s opinion and is not intended as investment advice. It remains the responsibility of the financial adviser to verify the accuracy of the information and assess whether the OEIC fund or discretionary fund management model portfolio is suitable and appropriate for their customer.
Past performance is not a reliable indicator of future performance. The value of investments and the income derived from them can fall as well as rise, and investors may get back less than they invested.
IBOSS Asset Management Limited is authorised and regulated by the Financial Conduct Authority. Financial Services Register Number 697866.
IBOSS Asset Management Limited is owned by Kingswood Holdings Limited, an AIM Listed company incorporated in Guernsey (registered number: 42316).
Registered Office: 2 Sceptre House, Hornbeam Square North, Harrogate, HG2 8PB. Registered in England No: 6427223.