To provide their clients with a comprehensive approach to risk management, RIAs and fee-based advisors use a more diverse range of solutions than DIY investors—including fixed annuities (53% vs. 17%), fixed index annuities (48% vs. 11%), liquid alternatives (44% vs. 19%) and smart beta ETFs (29% vs. 3%). Show DIY investors how a more sophisticated approach to risk management, including the skilled use of low-cost, no-load insurance and investing solutions, can help them capture more upside, while protecting against downside, to preserve their portfolio for the long haul.
4. Protect Against Outliving Their Savings
As the safety net fails while lifespans increase, the retirement income challenge is real and growing. In 1998, 59% of Fortune 500 companies offered a defined benefit pension plan, but by 2017 this had declined to only 16%. According to AARP, the Social Security trusts are expected to run out of cash by 2034, after which they will only be able to pay 79% of promised benefits. And the Nationwide Retirement Institute found that 70% of older adults believe they are eligible for full Social Security benefits years before they actually are.
To help clients prepare for and live in retirement, 87% of RIAs and fee-based advisors have a strategy to protect clients against outliving their savings, compared to only 63% of investors without an advisor. While half of RIAs and fee-based advisors (52%) say Social Security is a pillar of their retirement income strategy, more than two-thirds of DIY investors (69%) rely on Social Security as the foundation.
RIAs and fee-based advisors employ a far different set of solutions than most DIY investors—including variable annuities with living benefit riders (53% vs 20%), fixed income ladders/bond ladders (50% vs. 9%), longevity insurance/deferred income annuities (or DIAs 38% vs 9%), single premium immediate annuities (or SPIAs 38% vs 9%) and qualifying longevity annuity contracts (or QLACs 35% vs. 3%). Help DIY investors understand how an expanding category of fee-based insurance, that is simple and transparent with lower costs and more choice, can help them generate more retirement income—and protect that income for life.
Position Your Practice For Greater Success
More than a decade after the Financial Crisis of 2008, concern about volatility is again top of mind—and uncertainty is on the rise. As markets remain turbulent, and the world around them becomes increasingly complex, DIY investors can benefit from guided advice to close the preparation gap.
“Advisor Authority” reveals that the key to engaging DIY investors starts with an experienced advisor who commits to a fiduciary standard that puts the client’s best interest first. It requires holistic planning that moves well beyond the basics of managing their assets and creating the “safe havens” DIY investors can’t create for themselves. By positioning your practice to help DIY investors build more wealth, you also position your practice for greater growth, greater profits—and greater success.
Craig Hawley is the head of Nationwide Advisory Solutions.