It’s been a year since Covid-19 was declared a global pandemic. Stock markets have recovered, and the outlook for 2021 is looking up, especially as the vaccine rollout ramps up and the economy begins to open up. Job gains in March are expected to be the largest since October, and manufacturing is expected to continue climbing according to the Institute for Supply Management.

But the economy is nowhere close to pre-pandemic levels. We’ve seen how Covid-19’s impact is creating winners and losers, re-shaping the workplace and everything from commercial real estate to retail shopping. And we’re not out of the woods yet. It likely will take some time before we understand the true impact of the pandemic and move into whatever becomes the new normal.

Managing The Emotional And Financial Impact
According to the Nationwide Retirement Institute’s sixth annual Advisor Authority study of more than 2,500 advisors, financial professionals and individual investors, 85% of investors said they could do all the right things to manage their finances, and still be blindsided by outside events. Likewise, 70% said the pandemic has had an impact on their financial decision making. Investor optimism plummeted 19 percentage points last year, with only 36% of investors having an optimistic outlook in 2020 compared to 55% in 2019.

If there is a silver lining, it’s that more investors are turning to advisors and financial professionals to get the help they need. In fact, the number of investors who said they have an advisor or financial professional increased 16 percentage points, to 67% in 2020 from 51% in 2016. Investors said the number-one reason for working with an advisor was to feel more confident in their financial future. And when markets are volatile, they said the most important benefit of an advisor was to help them protect assets against market risk.

Protecting Against Market Risk
In 2020, investors said their number-one financial concern was portfolio losses related to the pandemic, with protecting assets a close second. At the same time, Advisor Authority revealed that only 64% of investors had a strategy in place to protect their assets against market risk, compared to 91% of all advisors and financial professionals. Clearly, investors could use your help.

To protect assets against market risk, diversification remained the foundation for both investors and financial professionals, according to Advisor Authority. In addition, our study showed that advisors and financial professionals were two to three times as likely as investors to use a diverse range of risk management solutions—including hedging strategies (42% vs 16%), liquid alternatives (39% vs 23%) and smart beta ETFs (32% vs 10%).  While important, diversification and other risk management solutions do not assure a profit and do not guarantee against loss in a declining market.

The adoption of annuities was also on the rise, especially among younger investors. Nearly three-fourths of Millennial investors (70%) and Gen X investors (71%), compared to just under half of Boomers (49%) said they would feel more secure if a portion of their portfolio was invested in an annuity to help protect against market risk. Roughly two-thirds of Millennials and Gen Xers said they would choose an annuity in the next 12 months to help protect against market risk as part of a holistic financial plan.

Balancing Growth And Protection
A diverse range of annuities can help clients with different risk profiles balance between growth potential and downside protection. For moderate to aggressive clients, able to take on more risk in exchange for more upside potential, Registered Index-Linked Annuities (RILAs) allow them to benefit from stock market growth, based on the performance underlying indices, such as the S&P 500, NASDAQ 100 or hybrid indices. This is combined with different degrees of protection against market risk through a buffer or a floor.

If your client’s concern is losses from ongoing volatility, RILAs with a buffer can protect against losses within a specific range—but can leave a client exposed, should markets fall below that range. To protect against substantial losses if downturns go lower for longer, RILAs with a floor offer a clearly defined level of protection—and absorb any losses below that floor. Some RILAs, such as Nationwide’s Defined Protection Annuity, provide a floor to limit losses, with the ongoing flexibility to dial that defined level of protection and risk up or down, as a client’s risk tolerance changes over time.

First « 1 2 » Next