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Lionel Martellini, Professor of Finance, EDHEC Business School

Retirement planning needs a tailored, solution-based approach


It is fair to say that planning for retirement is arguably the most important challenge for individuals, in terms of their financing needs. Over the course of one’s career, markets change, the geopolitical landscape evolves. Yet, over a multi-decade investment lifecycle, it is necessary to save a sufficient level of income to ensure that one’s retirement is fully funded.

“We have reason to believe that existing retirement products which one often finds in retirement plans, such as target date funds and balanced funds, are ill suited to address the needs of investors during retirement. Designing improved forms of retirement solutions really is a major challenge and an extremely important piece of the puzzle, both from the supply side and the demand side,” comments Lionel Martellini (pictured), Professor of Finance, EDHEC Business School, Director, EDHEC-Risk Institute.

To address the retirement investing issue, EDHEC Business School has partnered with the SDA Bocconi School of Management, Bocconi University to run a dedicated workshop in Milan on 16 October 2017, entitled: Masterclass on New Frontiers in Retirement Investing.

The one-day workshop will focus on two key pillars: firstly, how to fund life projects during one’s retirement and secondly, retirement investment solutions. 

“The main reason why we decided with Bocconi University to launch this seminar was to address the mis-match that currently exists between the retirement problem, on the one hand, and the range of unsatisfactory retirement products on the other hand. We felt that it would be useful to offer a master class to provide guidance towards better forms of retirement solutions.   

“We ran a similar seminar a few years ago in London. We know that there is a lot of interest in Italy and so it made sense to host the next seminar there,” explains Professor Martellini. 

To highlight the challenge in the UK specifically, new research by Close Brothers Asset Management finds that 27% of people do not even understand the UK pension system and that nearly three quarters (72%) of UK working adults have never sought professional advice about their pension. 

At the Milan workshop, Umberto Filotto, SDA Professor of Banking and Insurance at SDA Bocconi School of Management will run the morning session, focusing on how retirees can go about financing life projects. The main thrust of the session will be, ‘What are the investment strategies and products that retirees can use to try and generate better funding during retirement?’ How can one leverage products such as reverse mortgages and CQPs (wage and pension assignment loans) to unlock the wealth of their home? 

“We all know that home ownership is the biggest source of wealth, aside from the very wealthiest individuals. But it is somewhat ironic that that source of wealth is locked up in bricks and mortar that people cannot get access to. That’s how the concept of the reverse mortgage was born, which is now becoming quite big in the US,” comments Professor Martellini.

To complement this, the afternoon session will focus on how individuals can best invest pension contributions during the wealth accumulation stage of their lives, before they reach retirement age. What are the investment solutions – not products – that people can use to generate sufficient capital needed for retirement? Subjects that Professor Martellini will focus on will include:

  • Short-comings of existing retirement products
  • Goal-based investment principals
  • Meeting the mass customization challenge

Access to better investment products during one’s career, and access to better financing/lending solutions once the individual has retired; think of the workshop as an asset/liability approach to building a better retirement. 

““Today, there is a large consensus within academia that the principals of retirement planning are actually quite simple and well understood and that different forms of risk management should be used: diversification, hedging and insurance. Those three forces should be combined to generate meaningful retirement solutions. 

“It’s more a question of the industry getting together, finding the right format, the right governance, the right distribution channels. Target date funds, for example, are just products. They are not solutions to anyone’s retirement plan. They have been designed on the basis of being a smart marketing idea. The benefit of these products is that they are extremely easy to understand and explain but there is no real substance to them,” explains Professor Martellini.

In terms of target audience for the master class, both producers and users of retirement products are encouraged to attend. These will include asset managers, pension plans, financial advisors, consumer credit experts, as well as wealth managers. 

Professor Martellini is keen to stress that the masterclass will not be hypothetical or rooted in what the future retirement planning landscape might look like in 10 years’ time. Rather, it will focus on, and discuss solutions that can be perfectly implemented today, both on the funding side and on the investing side. 

“We feel the industry is coming together, technology is helping in the form of some robo advisors that are focusing just on the retirement space and so on. There is pressure on wealth managers to deliver more value at a lower cost. We are hopeful that the pieces of the puzzle, slowly but surely, are falling into place.

“There is a tremendous opportunity for the asset management industry to add more value to their clients. We feel there is more that can be done in the form of investment solutions, not just mass-customised products, to support people at a time when most are underfunded in their retirement plans,” he concludes. 

To find out further details about the workshop, please click on the following link:

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