Conducted on behalf of AXA Financial and the Insured Retirement Institute, the survey of 1,000 consumers and 300 financial professionals finds that more than 8 in 10 investors say that not losing principal is extremely or very important to them, while nearly the same amount are interested in learning about options that can provide protected growth.
The authors suggest that fear of investment loss and volatility may cause many Americans to hold more of their retirement savings in cash and bonds than in stocks, even though 55% of conservative investors with low exposure to stocks and low risk tolerance believe it is necessary to take investment risk to achieve financial success in retirement.
The study, “Protection, Growth and Income: Helping Consumers Reach Retirement Goals,” also shows that two-thirds of conservative investors prefer investments with a certain return, as compared to the possibility of achieving a higher return that is uncertain. Moreover, nearly 60% of conservative investors are not comfortable with their current stock allocation of 25% or less of their portfolios, despite 73% being concerned that they will not have enough income to last throughout retirement.
Considering these findings, financial professionals should address these opportunities to “drive deeper client satisfaction” by proactively discussing protection against stock market downturns and guaranteed lifetime income options, the authors recommend.
To that end, the study also shows that 56% of individuals rate their financial professional highly when lifetime income is discussed, versus 34% who do so when lifetime income is not discussed. Yet only half of individuals say they discuss guaranteed lifetime income with their financial professional, compared to nearly 80% who discuss risk tolerance.
Health Care Costs in Retirement
Saving for health care costs in retirement also creates an opportunity for financial professionals to discuss principal protection options, the report suggests. Nearly 60% of survey respondents said they are only “somewhat or not very well prepared” for a major health event. Yet fewer than 20% reported that they have worked with their financial professionals to estimate health care costs in retirement.
“Clients want their financial professionals to move beyond the standard risk tolerance questionnaire and engage them in a thorough discussion of options, including income planning for health care expenses,” notes Kevin Kennedy, head of the Individual Retirement business at AXA US.
Moreover, concerns over health care costs are amplified by the potential for inflation to chip away at retirees’ spending power, the study notes. An overwhelming 92% of individuals recognize that inflation will probably have an impact on their expenses during retirement, but only 26% state that they are concerned about inflation. This suggests that there may not be a clear understanding among respondents of how consequential inflation can be, particularly among the risk averse, the report notes.
“Helping clients grow retirement savings, properly insure against the risk of incurring large, unexpected health care expenses, and ensuring sufficient income that lasts throughout retirement are key areas where financial professionals can provide value to their clients, and their clients will recognize that,” the authors stress.
Greenwald & Associates conducted the research in the fourth quarter of 2017, as part of a two-part survey of more than 1,000 individuals ages 50 to 75, and 300 financial professionals with at least $10 million of AUM and five years of experience.