Beyond asset allocation

By Stephanie Holmes-Winton | November 12, 2009 | Last updated on September 21, 2023
4 min read

Historically, advisors have accepted the strategy of asset allocation as a great way to protect clients from risk while maximizing their potential returns over time. However, 2008 proved to us that no matter how well assets were allocated or diversified, this strategy just wasn’t enough to protect a lot of investors from the thrill ride the market provided.

The downturn may not have upset your clients too much if, for the most part, they were living on guaranteed pensions; most likely, the markets only wreaked havoc on their vacation or spending money. But for clients whose financial survival was threatened, it would have been a different story. Clients in the retirement risk zone — five years or less from retirement or already retired and living off their invested assets — had a very rude awakening. Unfortunately, so did we—the advisors.

Everything we’ve been taught told us that the best possible outcome would occur if we just made sure our clients’ assets were appropriately diversified according to risk tolerance among good quality investments. Many economists and fund managers, as well as the investment companies they work for, agreed that this was standard operating procedure. This was certainly backed up by the information we had at the time. I’m sure if you close your eyes just for a moment, you can picture the standard asset allocation slide that showed 91% of a portfolio’s long-term performance could be attributed to asset allocation. Can you see it? I can.

So what are we to do post-2008 now that we know better? How can we actually do better? Thankfully, there have been some breakthrough strategies on this front. One ground-breaking concept that I was lucky enough to learn of first-hand as an advisory board member, is an approach called product allocation.

The first product allocation tool for advisors was developed by Manulife Investments in collaboration with Dr. Moshe Milevsky and the QWeMA Group. The product allocation tool’s primary function is to estimate the sustainability of a client’s retirement income plan and then determine the optimal allocation of assets between various products in order to sustain retirement income for the client’s lifetime. To arrive at these conclusions, Milevsky developed the concept of retirement sustainability quotient (RSQ).

Product allocation is meant to be the final step of a written financial plan, or retirement income plan, for those in the retirement risk zone. Once you’ve completed the traditional portion of the financial plan, the next step is to determine the best product selection to create a high probability of sustaining the client’s required retirement income. The product allocation tool puts assets into three different categories: immediate annuities, guaranteed minimum withdrawal benefit (GMWB) products and systematic withdrawal plans (ie, GIC’s, mutual funds, seg funds other than GMWBs, stocks, bonds, cash, etc.). For many of us, this might mean looking at products we’ve either never sold, or haven’t sold in some time.

I know changes and regulations are coming at us a mile a minute, but clients deserve our best. I believe this so much that that I’ve used my first official column with to get the word out: we need to make sure we have a thorough understanding of product allocation and how it can fit into our current practices.

Not only are the best interests of our clients at stake, but the best interests of our businesses are as well. Failing to grasp this concept, or worse, ignoring it altogether, could not only make you vulnerable to losing clients to advisors who “get it,” but you may be considered by some to be negligent. In a world where you can sue someone if you spill hot coffee on yourself, your time is well spent protecting yourself; even more so when you’re protecting your clients at the same time.

About 38% of Canadians have pension plans today, only some of which are guaranteed. The other 62% have no plan beyond basic government benefits. This leaves us with a giant wave of DIY retirees, something we’ve never experienced before. While you may have to let go of some product biases to integrate product allocation into your practice, it’s a necessary step. This is a new era and we need to use new tools.

If you take a closer look at the sustainability of your clients’ retirement income, you may find many holes. You owe it to your clients to carefully consider any tool or product that may give them the best chance at the retirement they have planned for. Product allocation is not about any one product or any one company. Any advisor can access the product allocation tool and related resources at

Stephanie Holmes-Winton

Stephanie Holmes-Winton is a Halifax based financial services educator/speaker who helps advisors find the money to help their clients fund their financial plans. She is the author of Defusing The Debt Bomb & $pent. Stephanie is also the founder and board chair of the Certified Cash Flow Specialist™ designation program. You can reach Stephanie at or