HKSI Paper 12 Client objectives and the products available question: time horizon

HKSI Paper 12Client objectives and the products available

Mr and Mrs Fung, both 55, plan to retire at 65 and then live off their portfolio for about 25 years. How is their time horizon BEST described?

A Short-term, because anyone within 10 years of retirement should treat the horizon as under 3 years
B Multi-stage: about 10 years until retirement, followed by a drawdown period of about 25 years
C Single-stage of 10 years, ending when they retire and start to make withdrawals from the portfolio
D Single-stage of 35 years, with the same liquidity needs and risk capacity throughout the period

Show the answer and explanation

Answer: B. Multi-stage: about 10 years until retirement, followed by a drawdown period of about 25 years

A time horizon can have more than one stage when the client's circumstances will change at a known point. The Fungs have a pre-retirement stage of about 10 years, when they are still saving, and a post-retirement stage of about 25 years, when the portfolio pays for living costs. Each stage brings different liquidity needs and risk capacity, so the IPS should treat the horizon as multi-stage. Ending the horizon at retirement ignores the 25 years of withdrawals. Calling it short-term understates a horizon of up to 35 years. One 35-year stage ignores the switch from saving to spending. Source: Standard portfolio management practice (investment policy statement: objectives and constraints) (as at October 2026).

Common mistake

Ending the horizon at retirement. Retirement starts a new stage of the horizon; the money must still last for decades.

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Original study material mapped to the public HKSI Paper 12 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.