Risk-averse advisors may be losing opportunities to grow their clients’ portfolios, Allianz Life found in its inaugural “RIA Retirement Risk Review Study.”
Nine out of 10 financial advisors in a survey of 289 advisors (or 88%) said it was more important to effectively manage risk in their clients’ portfolios than it was to have the highest return on investment. Seventy-nine percent said that their clients at or near retirement are concerned about outliving their savings.
The closer in age a client was to retirement, the more wary the advisor was in recommending high-risk/high-reward financial products, the study found.
“Nearly 60% of advisors note that clients need to accumulate more money in order to have a financially secure retirement, but are too close to retirement to take on the risk of investing in high-risk/high-reward financial products,” Allianz said in a press release announcing the study.
More than half of advisors in the survey (53%) said that clients 10 years away from retirement or closer feared a substantial loss of money in their retirement accounts in the event of a stock market drop.
The respondents also said that their clients 10 years or more from retirement have the highest portfolio risk in terms of high-equity valuations, taxes and inflation. In contrast, the greatest portfolio risks to those in or nearing retirement are longevity risk and low interest rates.
Four out of 10 advisors participating in the study said they were considering new risk management solutions for 2021. Of those advisors, 52% said they would recommend low volatility ETFs to their clients; 44% said they would recommend buffered outcome ETFs (which add a degree of downside protection); and 37% may recommend annuities.
Allianz Life and Zeldis Research Associated Inc., based in Pennington, N.J., conducted the online survey in February and March 2021 with a national sample of 289 financial advisors. Respondents included investment advisory representatives (IARs) and hybrid advisors with five years or more of experience, managing at least $25 million or more in client assets, and who make investment product recommendations.