COVID-19 and its economic aftershocks have raised important questions for Americans preparing to leave the workforce, and surfaced new concerns about their ability to meet the financial demands of retirement.
Advisors’ working environment has also changed significantly. Many advisors are adapting to new technology, learning how to maintain connections with current clients or building relationships with new clients through a computer screen instead of across the table.
While it may feel like everything about the current environment is different, there are some aspects of retirement planning — like the value of guaranteed income — that remain constant.
Advisors may not have been discussing these solutions as frequently with clients in the midst of a 10-year bull market, but they should expect clients to be more interested in solutions that offer stability now. In fact, new data from New York Life and Morning Consult found that 62% of U.S. adults are more interested in a product with a predetermined payout that does not change regardless of how the market is doing, and 56% say they are more interested in a product that allows them to benefit from stock market growth, while also providing a floor for how much they could lose.
(Related: Clients’ Real Risk Tolerance)
Given that clients may be more likely to want to have conversations about guaranteed income, here are three questions that advisors should ask about annuities in this environment.
1. Can the carrier I work with withstand the financial pressures caused by COVID-19?
The current environment is placing financial stress on a variety of businesses, but insurance companies are facing the unique challenge of providing income and guarantees to policyholders during a time of investment losses and a protracted low interest rate environment. It’s important to consider the financial strength and history of the carrier, given those will be the key factors that influence whether they can keep the guaranteed income promise you are making to your clients. It’s also worth inquiring about their stress-testing practices and whether the insurer has planned for scenarios like the one we are currently facing.