Page 8 - Wealth-Adviser-Issue-118 (FWP)

ISSUE 118
AUGUST 2025

BUILDING A

RESILIENT

INCOME

PORTFOLIO

BEYOND

CASH

AND

BONDS /csamhaber/pixabay.com/

BY WEALTH ADVISER Financial market experts note: “Interest rates are fall-
ing, which means the cost of money is getting cheaper…
In an era of falling interest rates and heightened market those declining rates aren’t so good for savers and those
uncertainty, relying solely on bank deposits and traditional after income” . This squeeze on traditional cash prompts
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bonds for income can leave investors exposed to dimin- investors to seek yield elsewhere. Research shows advisers
ishing returns and tax inefficiencies. Today’s retail clients helping clients improve returns by an average 3% per annum
need a diversified income strategy that balances higher through diversified strategies—underscoring the value of
yields with risk management and inflation protection. This moving beyond bank deposits and vanilla bond allocations .
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article explores how alternative credit strategies, real assets, For many retirees and pre-retirees, a portfolio that blends in-
and diversified property exposures can be combined into come sources is no longer optional but essential to maintain
a resilient income portfolio suited to the needs of curious purchasing power and meet living expenses.
Australian investors. The fundamental challenge lies in understanding that
income diversification operates on the same principles as
The Income Challenge asset diversification—spreading risk across different sourc-
1in Today’s Market es reduces reliance on any single economic factor whilst
As official rates retreat, savings accounts and term potentially enhancing overall returns.
deposits offer ever-lower returns—and investors in higher
tax brackets see much of that income eroded by tax . Understanding Alternative
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Traditional savings maximiser accounts and bank term-de- 2Credit Strategies
posit “special offers” are variable rate products that will Alternative credit encompasses lending activities outside
decline further alongside expected Reserve Bank rate cuts . traditional banking channels, including corporate lending,
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Meanwhile, bond yields, having surged from multi-century project finance, and syndicated facilities. This asset class
lows, now look more attractive, but carry the risk of price typically offers yields significantly above traditional fixed
falls should inflation or rates reverse course . income, often in the 8–10% range, compared to the 2–3%
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