Introduction
During the podcast season these blogs are based on, I interviewed Matthew Yeates from 7Investment Management. So many of my listeners got value from our discussion that I turned the transcript into posts for you to read.
The Interview
PM: It’s my pleasure to welcome Matthew Yeates, Senior Investment Manager at 7Investment Management. Can you give us a quick bio? Who you are, how you got to where you are at 7IM?
MY: At 7, I work on the investment team, as you could probably guess earlier, but before that, and actually when I first moved to 7, I worked on the risk team. Before 7, I worked in quant research at another investment firm. Between risk and quantitative analysis, my work tends to be exactly that; quantitative in nature.
Within 7 itself, a lot of my time is spent leading our research efforts into the retirement space. How can we approach and think about some of the problems that people in retirement face when they’re thinking about how to structure investments? I do that from a kind of quantitative, scientific angle.
PM: So you’re exactly the right person to speak to! It’s almost as if that was intentional. Just before we dig into the mechanics of how 7IM’s retirement income service is structured; does investing in retirement differ fundamentally from investing in accumulation? And if so, how does it differ?
MY: Yeah, I think it does, especially when we’re considering the path that many investments could take. There’s one key distinction, and it’s that that sits at the corner of any advice that we give people – try to think about the long-term.
Now, when you’re investing in retirement, essentially what you’re going to be doing is taking income over the short-term. When you’re building up that retirement pot, before you’ve got to the day when you’re taking money out, you have the benefit of being able to take the long-term because you don’t have to take money out.
That for me is the key difference, and that has a difference from two angles. One is the scientific angle, which is the shape or drawdown in markets can be more meaningful, as you’re potentially drawing money out at the same time, crystallising losses and not giving them time to recover.
And the second, which is just as important, is for the end person who is trying to live off that retirement pot, the behavioural nuances of it become that much more difficult. It can become much scarier. If retirement is 10 years away and you have a drawdown, you might think, ‘At least I’ve got a bit of time to allow things to recover.’
If it’s live and happening and you can’t go back to work, what do you do then? From a scientific angle, you have this impact of withdrawing money at the same time as market falls. From the behavioural client side, it can become really challenging for me to find ways for them to feel comfortable, even if you have those drawdowns.
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