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FAs Prioritize Clients' Risk Management Over Portfolio Gains

By Alex Padalka June 1, 2021

Financial advisors are prioritizing risk management over portfolio gains as many advice clients worry about running out of money in retirement, according to a recent survey.

Seventy-nine percent of the 289 advisors surveyed by Allianz Life Insurance Company of North America in February and March said clients who are nearing or at retirement are concerned they’ll run out of money in retirement. Allianz Life surveyed registered investment advisors and hybrid advisors with five or more years of experience, more than $25 million in client assets and at least half of their business coming from individual clients.

Close to 60% of the respondents believe their clients will need to amass more money to have a financially secure retirement but they also think clients are too close to retirement to add more risk in their portfolios for higher returns, Allianz says.

Around 88% of the advisors surveyed believe that effective risk management is more important than generating the highest gains.

“Factors such as inflation and the rising cost of living are raising red flags for many near-retirees and retirees when it comes to longevity risk. Advisors must communicate regularly with clients about these risks and the evolving set of investment solutions available to help meet clients’ needs,” Heather Kelly, senior vice president of advisory and strategic accounts at Allianz Life, says in a statement.

Among the biggest threats to client portfolios for clients fewer than 10 years from retirement are spending too much money and running out of it in retirement, cited by 56% of the respondents, followed by clients outliving their money, cited by 54% of advisors, and the stock market dropping and impacting retirement accounts, cited by 53% of respondents.

To manage risk, four out of 10 advisors are looking at new risk management options for 2021, Allianz Life says. Among them, 52% are considering low-volatility exchange-traded funds, 44% are looking at buffered outcome ETFs and 37% are considering fixed-index annuities and registered index-linked annuities, according to the survey.

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Tags:  Investment strategies , Retirement planning , Portfolio management , Allianz

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