Walking The Tightrope Of An Improving, But Still Uncertain, Economy

Walking The Tightrope Of An Improving, But Still Uncertain, Economy

Its really something to behold, when press releases arrive here saying, “We hired 20 new people this month.”

Given the dark clouds of unemployment that hung over most of the past 3 yearsand in many areas, still do–such announcements are the proverbial ray of light. The announcements also may become kindling for insurance and financial product strategies in 2004.

Before looking at those strategies, lets see whats going on. Every day, in some medium or another, some kind of news about new hires comes out. A survey in the November 2003 issue of Chief Executive Magazine, for example, said that 45% of over 300 chief executive officersmany from smaller and medium-sized businesses–intend to hire in 2004. Only 10% said they plan to reduce staff next year.

The Wall Street Journal highlighted the trend in its Dec. 4, 2003, front-page story, “Trickle Up: Small Companies Slowly Build Momentum in the Job Market.”

Naturally, these items bode well for the insurance sectoror, I should say, will probably bode well for the sector sometime next year.

Right now, the scuttlebutt Im hearing from producers is that many mid-income clients “arent there yet.” Employed or not, these individuals continue to prefer to buy insurance with low limits and low cost. Theyll go for guarantees, too, if they can afford them. And many still prefer the fixed accounts of variable products and 401(k)s.

High-net-worth households ($5+ million) do not live in financial straightjackets, but they, too, seem to be making cautious moves. In 2003, for example, they shifted 26% of their investable assets into managed accounts, up from 13% two years ago, reports Spectrem Group, Chicago. The reasons cited for this shift are telling: desire for “more control over their investments,” and “protection against receiving taxable distributions.” (Premium subscribers to National Underwriter can view our Dec. 2, 2003, Hot News report on these findings at our online archives.)

The implication is clear: At year-end 2003, many consumers kept on towing the financial line. My guess is, if hiring does spike in 2004, it probably will take awhile for the public mindset to catch up toand to trustthe change.

Therefore, in setting strategies for 2004, financial advisors and insurers will need to walk a tightrope.

Pulling on the one side will be the continuing need to present safe insurance and financial service offerings.

Pulling on the other side will be awareness that the financial fog is lifting and that financial needs and opportunities may be changing faster than many clients realize.

This tug-and-pull will raise several critical questions for industry professionals in the field and home office.

Some issues for advisors:

–Should I nudge my client to consider taking on more risk now, even though the client still is focused on building safety and security?