The bottom line: a very practical and well argued philosophy for retirement funding that will make sense to practitioners.

Mr Zwecher has developed a soundly based and practical philosophy for funding of retirement benefits, and produced a book that would be highly suitable as a text book for a course in applied financial planning. It could also be useful to retirees or near retirees that have some knowledge of financial terms.

The book moves slowly through the process, and for a quick read to understand the philosophy, it becomes repetitive and drawn out, but as a text book for students with little knowledge of financial planning, especially the retirement phase, the pace may well be appropriate. I think ‘Theory’ should have been left out of the title of the book, as it is difficult to find the theory, other than a few references to the Capital Asset Pricing Model (CAPM) that seem to have been inserted to give the book some artificial link to finance theory, which in my view is unnecessary.

The book progresses from an introduction indicating that ‘balanced portfolios’ may not be suitable for the retirement phase, and moves on to justify this by introducing the concept of risk, and delineating between upside and downside risk, which links very nicely to the later chapters on how much risk can be taken into a retirement portfolio.

Very quickly, Mr Zwecher moves to his main philosophy then which relates to the need to manage downside risk, and introduces the concept of ‘lifestyle flooring’. This concept should be easy to appreciate and is presented in a manner that makes common sense without the need for some theoretical justification. Having introduced the need for downside risk analysis, the book then considers the role of annuitisation within the ‘lifestyle flooring’ concept, and relates the role of annuities to the ability to fund longevity risk.

The introduction of taxation limits the value of the book but this section can be easily ignored by students and practitioners outside the UK tax regime without losing anything significant from the philosophy.

The remainder of the book deals in significant detail with some practical examples and issues, and introduces discussion on how to manage ‘excess assets’ over that necessary to secure the lifestyle flooring. Mr Zwecher includes a lot of material on how a practitioner could use the philosophy, and how to best introduce this to clients, which may well be of interest to practitioners, but is probably of little interest to students.

Whilst I am of the view there is material of interest to students in the book, overall it seems to be more useful for practitioners who are in the business of retirement planning, and provides an almost complete guide to why the philosophy should be followed, how to ‘sell’ it to the client, and how to go about working out what to do for each client, including how to manage client expectations.