Bridging the expectations gap in retirement advice

Whilst accumulation is largely about growth and contribution strategies, retirement is about sustainability, confidence and navigating uncertainty. Advisers see firsthand how difficult it is for clients to feel assured that their savings will support them throughout retirement – and how much of that assurance comes not from better products, but from better conversations.

In recent conversations with financial advisers, particularly against the backdrop of a growing understanding of Innovative Retirement Income Streams (IRIS), several consistent themes have emerged. These insights highlight not only the technical challenges of retirement planning, but also the deeply human elements – expectations, fears, and behaviours – that shape client decision-making.

The expectations conversation

The gap between client expectations and financial reality is one of the most persistent challenges in retirement advice.

Clients often approach retirement with assumptions about how much they will spend, the lifestyle they will maintain, or the income they will require – assumptions that are frequently misaligned with their actual financial position.

This is why early, detailed conversations around cash flow are critical. Encouraging clients to test their expected retirement lifestyle while still earning an income can be a powerful exercise:

Is the anticipated lifestyle realistic? Are spending expectations sustainable? Does the current trajectory support future needs?

These conversations are not always comfortable, but they are essential. They form the foundation upon which all other planning decisions are made.

The risk conversation

A persistent misconception among clients is that retirement should automatically mean a reduction in risk. While this may feel intuitive, the reality is more nuanced.

Around 60% of a retiree’s total income is generated from returns earned during retirement. This single statistic reframes the adviser’s task. Retirement is not the end of investment risk – it is the point at which investment outcomes matter most.

For many clients, particularly those with lower balances, maintaining some exposure to growth assets may be necessary to sustain their desired lifestyle over a potentially long retirement. A sharp market downturn shortly before or after retirement can permanently impair income sustainability, even if long-term returns recover. Yet the instinct for many clients is to become overly conservative at precisely the moment when they may still need growth to fund 25 or 30 years of post-work life.

Risk is not something to be eliminated. It needs to be managed appropriately for the decades ahead. These conversations are most effective when they begin early – building familiarity with market dynamics and setting realistic expectations about returns helps clients become more comfortable with risk over time, rather than confronting these ideas for the first time at retirement.

The spending conversation

Today’s retirees don’t taper spending the way previous generations did. Travel, dining and lifestyle experiences often continue well into later life – or increase. Expenditure is not following the old declining-curve assumption, and advisers need to model for that reality.

Longevity compounds the challenge. Many clients underestimate how long they may live, often anchoring expectations to family history. Yet there is a significant probability that at least one member of a couple will live into their 90s. Planning solely for a shorter lifespan introduces the risk of outliving savings – arguably the most critical financial risk in retirement. And half of clients will, by definition, outlive the average.

A practical approach is to model multiple scenarios, planning for both shorter and longer lifespans. This dual-scenario planning helps clients appreciate the trade-offs involved and reinforces the value of solutions that provide lifetime income. A retirement plan built on the assumption of declining expenditure and average longevity may look sustainable on paper but may fail in practice. Honest conversations about how clients want to live – not just in the first five years, but in year fifteen and beyond – change the shape of the advice.

The education conversation

In some cases, retirement income products, including Innovative Retirement Income Streams (IRIS), may initially seem complex or unfamiliar. Without careful explanation, that unfamiliarity may become a barrier to adoption. Clients often respond with hesitation I– “this sounds a bit complicated” – which underscores the importance of how these solutions are introduced.

The most effective advisers treat this as an education challenge, not a sales challenge. They break down concepts into simple, relatable terms. They tailor explanations to individual learning styles. They use visual tools and scenarios to illustrate outcomes. And they introduce ideas gradually – well before decisions need to be made – so that concepts become familiar over time rather than overwhelming at the point of action.

This “education-first” approach is especially important for clients in their 50s, for whom retirement may still feel distant. Early exposure means that when a client reaches the decision point, IRIS feels like a natural extension of the plan rather than an unfamiliar product.

At their core, IRIS products are designed to provide income for life, the potential to enhance access to Centrelink benefits, and greater certainty around income sustainability. When linked directly to client goals rather than product features, these benefits resonate strongly. Blending IRIS with more familiar structures such as account-based pensions can also make the concept more accessible, preserving flexibility and liquidity while introducing an element of income certainty.

There is no single “ideal” client for IRIS solutions. Their applicability spans a wide range of scenarios, from those seeking to maximise Centrelink outcomes, to high-net-worth clients looking to create a stable income floor. The common thread is not balance size but the desire for greater confidence in retirement income.

The estate conversation

Estate planning remains a central concern for many clients – and can create real resistance to retirement income strategies. Clients worry that allocating funds to lifetime income streams reduces what’s left for beneficiaries. While this may be true in certain scenarios, the conversation needs reframing.

Superannuation was not designed as an estate planning vehicle. It is intended to provide income in retirement. Advisers play a crucial role in helping clients understand this distinction – and in showing that the two objectives need not be in conflict.

A balanced approach, combining lifetime income streams with account-based pensions, can address both: providing income certainty during retirement while preserving flexibility and estate value where appropriate. Features such as reversionary income for spouses offer important protection, particularly in cases involving younger partners or blended families, where the death of a spouse can abruptly shift Centrelink thresholds and entitlements.

A more nuanced future for retirement advice

These conversations share a common thread: understanding precedes confidence. Clients who understand their position, their risks and their options make better decisions – and feel better about those decisions over time.

For advisers, this represents a meaningful shift. The traditional perception of the adviser as a technical expert is evolving into something broader – educator, translator and confidence builder. Retirement advice is becoming more nuanced. It requires a deeper understanding of client goals, more sophisticated modelling, and a greater emphasis on communication.

Those who invest the time to have these conversations – early, clearly and consistently – will be better positioned to deliver outcomes their clients can feel as well as measure.

The number in the client’s head and the lifestyle in their imagination may not match on day one. The adviser’s job is to close that gap – one conversation at a time.

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Important Information

This document is for financial adviser use only – it is not to be distributed to clients. This document has been prepared by IOOF Investment Management Limited (IIML) ABN 53 006695 021, AFSL 230524, RSE License No. L0000406 as Trustee of the IOOF Portfolio Service Superannuation Fund ABN 70 815 369 818. IIML is part of the Insignia Financial Group of companies, consisting of Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate. The information in this document is factual information or general advice only and does not consider any individual‘s needs or objectives. Any calculations are for illustrative purposes only. The information in this document has been given in good faith and has been prepared based on information believed to be accurate and reliable at the time of publication. Before making any decisions, advisers and their clients should consider the relevant Product Disclosure Statement, which together with the Target Market Determination is available to view and download at myexpand.com.au.