ORLANDO, Fla. -- Advisors need maximum flexibility to meet the retirement challenges facing todays investors, Paul Cahill, managing director of National Sales at Virtus Investment Partners, said at the Raymond James Financial Institutions Division Symposium on Tuesday.
Generations X and Y and the people coming behind it will be the first generation that has more living adult parents than adult children, Cahill told the gathering of bank advisors, investment program managers and other financial professionals.
In addition to longer life spans and growing health care costs, investors must contend with diminished expectations, particularly as defined benefit pension plans fade into history.
To manage the new demands of retirement, advisors need to help clients use a more tactical investment approach and focus on the sources of retirement income that they can control.
Moreover, they can no longer rely on the high returns of the past. The myth of the 10% return on investments is a God-given right to Baby Boomers and that has changed dramatically over the last 10 years, Cahill said.
Cahill noted that the S&P 500 Index has grown at the mythical average rate of return of 10% very sporadically. During the past 86 years, the market has swung widely, at times losing more than 20% in a year and at others gaining more than 20%. From May of 2008 to March of 2009, for example, the S&P lost 51%. To make investors whole, the market would need a gain of 104%, Cahill said.
Advisors need to protect their clients from these dips in the market by making tactical allocations in their portfolios. Cahill touted the Virtus Premium AlphaSector Fund, which he said is flexible in moving in and out of nine sectors. The model moves from fully bullish in which it invests equally in each of the nine sectors to fully bearish in which invests 100% in cash equivalents.