In Focus

June 9, 2009

e're pleased to be able to post a link to the video, "Retirement Risk Zone", by Manulife. Not because we're promoting the IncomePlus product (unavailable in the U.S. anyway) but instead because the video provides a wonderfully simple explanation of the very important concept of the Sequence of Returns.

What is the Sequence of Returns and why should you care? Well, if you are a client of an investment adviser who hasn't paid attention to the Sequence of Returns, you'll know. You'll know because you may not have enough money to fund your retirement!

The Sequence of Returns is a kind of reality test. It says don't tell me that I will have enough retirement savings to live on for my entire life because of some average historical return projected forward, or because some fancy "Monte Carlo" simulation tells me so! Instead, give me a complete picture of what will happen to me if, in the first year or few years of my investing with you, my account performs much worse than the average historical market return!

The video shows what can happen. It's important information for all investors -- especially retirees and those nearing retirement -- to have known before their advisers recommended a 100% equity allocation in their investment portfolios.

Many investment advisers recognize the importance of the Sequence of Returns. Strangely, however, one of the larger investment advisory firms in the country, and a vociferous self-promoter, Fisher Investments, seems to have given it little or no recognition. Not a word is mentioned in its publications such as, "How to Better Protect Your Financial Assets" and "The 15-Minute Retirement Plan - How to Avoid Running Out of Money When You Need It Most."

Am I missing something? If there is someone reading this who can provide or point me to a Fisher Investments publication or discussion about the Sequence of Returns, I would be most appreciative. And please let me know if there are any investment advisers besides Fisher Investments that have given Sequence of Returns short-shrift? I look forward to hearing from you.