Wealth age just as vital as heart age says AXA Wealth

AXA Wealth is urging people to examine their wealth age as well as their heart age as they approach retirement.

Investment experts at AXA Wealth, AXA's wealth management arm, say that people need to adjust their fiscal as well as physical fitness needs as they get older. In particular, an investor's risk profile can change significantly the closer they get to retirement.

At age 40, a colourful, varied yet more adventurous investment portfolio containing a wide array of regions and sectors may be appropriate, with perhaps no asset class dominating the portfolio.

But by 65, volatility and risk should be reduced, with not only a careful consideration of asset allocation but of individual funds within that asset class. Getting the fund choice wrong can be painful. For example, across a total of 246 funds in the UK All Companies group, over a typical period of five years, the difference between best and worst can be up to 100 per cent.

In its recent White Paper Wealth management - from recession to recovery, AXA Wealth identified three model portfolios for investors aged 40, 55 and 65.

A key theme to emerge from the AXA Wealth White Paper is that consumers are put off investing because of the vast array of retail funds on offer; slashing the number of funds available could encourage more people to take an interest in the funds they are selecting, dependent on not only their attitude to risk but their wealth age.

Across some sectors and regions there is choice of literally hundreds of funds and with wildly differing returns. For example, someone investing £10,000 over 20 years in an investment yielding 7.5% would receive a lump sum of £42,479. But someone investing the same money split equally into investments yielding 15%, 10%, 5%, 0% and -5% respectively would receive £54,212 at the end of the 20 years.

To weed out poorly performing funds, AXA Wealth's investment company Architas Multi-Manager Limited has developed a sophisticated fund screening tool to underpin its already rigorous quantitative and qualitative investment process. The proprietary system looks at holistic and up to five years past performance. Funds that make the grade have undergone a large number of different tests, over different time periods, including many that analyse consistency, performance, volatility and risk. This creates a more accurate and consistent picture, rather than pinpointing a lucky ‘snapshot' in time. Funds are continually monitored and any that do not meet the highest standards required will be removed.

Mike Kellard, CEO, AXA Wealth: "To ensure that the consistently good performers are flagged, our screening process grades performance over combinations of multiple time periods, picked at random. Whilst each fund's performance is assigned a rank for each time period, our filtering tool also rewards reliability. Therefore, a fund with good steady performance would be highlighted, rather than a fund that has delivered a very broad spectrum of relative performance.

"To look after your heart age, you wouldn't try to do the same workout at 65 as at 40. Equally it makes sense to pay attention to your wealth age and gear your portfolio accordingly. People of all ages can benefit from sophisticated fund selection by seeking professional advice, but in the run up to retirement, that intelligence needs to minimise risk. Just like your heart, as you get older, your money needs to work hard but it is best to avoid sudden shocks."