SMART RISK CONTROL BLOG

When weighing the risks and benefits, many of your clients would rather have portfolio protection with growth potential than portfolio performance that is susceptible to market volatility.

This preference likely aligns with how many financial advisors approach clients’ investment and retirement planning strategies by prioritizing risk management and wealth preservation.

On its surface, this alignment suggests harmony; clients generally want protection and advisors are willing to provide strategies accordingly. For investors who are already in higher wealth tiers and simply want to live off existing assets, this approach may be appropriate. 

However, those investors with fewer investable assets might lack sufficient savings to fund retirement in spite of being cautious about preserving their accumulated wealth and minimizing risk.

As a financial advisor, you’ve likely talked to many clients about annuities and how they could play a beneficial role in an individual’s overall retirement income strategy. It’s also possible that you may have been met with some objections or needed to provide some clarity between perception and reality.

Your clients may misunderstand how annuities work or have only heard half-truths about the role they could play in a diversified investment portfolio. Your guidance and expertise can help them understand the facts and determine how an annuity might help them reach their retirement goals.

Meet Steve and Beth. After the economic collapse of 2008–2009, they couldn’t stomach seeing the financial markets plummet, taking their hard-earned money with it. So they called their advisor, withdrew from the market and cut their losses, vowing never to return. Whenever their advisor tried touching base, he was met with a cold shoulder.

As the economy regained steam, Steve and Beth watched from the sidelines as markets climbed to new, all-time highs. They knew they were missing out on potential gains and wondered if they should consider risking the market again. “Hey Beth, maybe we should contact our old advisor.”

And then the pandemic hit.

Any opportunity you have to educate clients about investment options is a good one. Portfolios with traditionally recommended platforms may not include a potentially valuable segment of investment options: annuities.

Although there remains enormous uncertainty regarding the immediate future, it is important to remember that financial markets are forward looking and will anticipate an improvement in economic trends well in advance of the media.

School closings, empty concert halls, canceled tournaments, travel restrictions, social distancing...efforts to stem the spread of the novel Coronavirus (COVID-19) have been far-reaching, and millions of Americans and countless organizations have shut their doors. Chances are, your financial firm may be among them. Suddenly, we’ve become a “work-from-home” nation.

As we watched much of the world grind to a halt, some investors watched in disbelief as the markets plunged. Advisors watched, too, wondering how they might quell their clients’ fears and guide them through these uncertain times, especially when meeting face-to-face was no longer an option.

While the current economic climate is concerning, there may be a silver lining for financial advisors.

Fears over the Coronavirus (COVID-19) and its rising death toll have resulted in significant market volatility in recent weeks. The market rallied, only to fall again, then up, then…you get the idea.¹ When the Federal Reserve issued an emergency rate cut in an effort to ease investor concerns, stocks experienced sharp gains yet again, only to quickly fall.²

Are guaranteed lifetime withdrawal benefits (GLWBs) poised to have a “moment?” That’s what David Hanzlik, Vice President of Annuity and Retirement Solutions at CUNA Mutual Group concludes.¹

Despite some older Americans choosing to remain in the workforce, Baby Boomers continue to retire in droves. Roughly 3.8 million Boomers will turn 65 every year during this decade, which will have a significant impact on the labor force.² It will also have a significant impact on the income of those retirees.

As we age, it’s easier to reflect back on the phases of life and appreciate the role each played in forming who we are today. There were the awkward teen years, the aspirational college years, then a career, family and maybe even a dream home. Before you know it, retirement approaches and you wonder where the time went.

For retirees, the fear of losing any portion of their retirement savings is very real. Everyone in the market would love a guarantee on their return. Unfortunately, there are few guarantees when it comes to investing, especially when factoring in market turbulence, a fluctuating economy and meager interest rates. Annuities with a guaranteed lifetime withdrawal benefit (GLWB) rider can be appealing to clients approaching retirement because, as the name implies, the rider insures the investment and minimizes risk.