The administration of President Donald Trump has announced a long-awaited package of tariffs, and investors around the world have reacted by pummeling stocks.
The financial protest against tariffs was no friend of U.S. life and annuity issuers: At market close on Thursday, share prices for the issuers in our tracker were down from 3.7% to 13%.
Matt Dyer, a Penn Mutual investment specialist, says investors' fear of federal government policy moves may now be causing bigger swings in stock prices, and the bigger swings in stock prices may be increasing investors' fear.
"Since this feedback loop shows no signs of ending, I expect implied volatility to have a higher floor this year than we saw during the previous few years of trading," Dyer says in a new commentary.
Jared Nepa, head of Lincoln Financial's insurance solutions distribution team, says he is seeing the impact of the attitude shift on agents' and advisors' conversations.
"Clients are seeing the volatility in the markets, and they are raising concerns and bringing questions to their financial professionals," Nepa said.
What can financial professionals who have helped clients with annuities and long-term savings arrangements based on life insurance do?
Here are some ideas, based on advice from industry sources.
1. Prepare for stormy days when the sun is shining.
Bill Broich, a longtime annuity marketer, said financial professionals should always encourage retirement savers to consider using arrangements such as cash accounts, non-variable annuities, annuities with buffers against market losses and life insurance policies with benefits guarantees or buffers.
"Unpredictable markets can threaten retirement security," Broich said. "Emphasize the importance of diversification and stress-testing portfolios for potential downturns."
2. Take calls from clients.
Some financial professionals might prefer to call in sick on days of upheaval, but Craig Hawley, president of Nationwide Annuity, said volatile days were good days to talk to clients.
"Reviewing financial plans and discussing changes to goals or financial situations with clients can help ease their anxiety during tumultuous markets," Hawley said.
3. Mention products and strategies that can help clients manage market risk.
Economists and investment experts emphasize the importance of building diversification into a long-term investment strategy, not panicking over the headlines of the day.
But, if some clients have not diversified their portfolios, this could a good time to talk to them about that.
Financial professionals could mention traditional fixed annuities and fixed indexed annuities, suggested David Byrnes, head of distribution at Security Benefit.
Traditional fixed annuities have no exposure to stock market volatility, and fixed indexed annuities have exposure only to positive market movements, Byrnes said.
"Given the recent correction, now might be a time to 'buy low' with an FIA and still protect principal," Byrnes said.
4. Adopt modern communications and product tracking tools.
Jay Charles, head of insurance products at Luma Financial Technologies, a financial services technology firm, said having the right systems in place during market downturns can help strengthen client relationships.
Systems that let clients check on the performance of market-sensitive products themselves may help increase their confidence, even if the recent performance is poor.
Planning tools can help financial professionals speed up the process of developing any strategy updates that might be needed, and communications tools can help financial professionals send clients personalized messages about recent market conditions.
5. Remember that clients all have their own, individual sources of financial volatility.
When Global Atlantic surveyed 1,009 investors in December, 42% said they were extremely or very concerned about stock market volatility, but 62% said they were extremely or very concerned about rising health care costs in retirement.
The threat of rising health care costs is still there, no matter what the market is doing.
Similarly, Voya found when it surveyed about 1,000 consumers in January that 80% said it’s extremely important or important to stay the course during a volatile market environment and 87% said it's extremely or very important to have a guaranteed source of income in retirement so that they don’t outlive their retirement savings.
One way to read that data: 87% of the Voya participants see the possibility of outliving retirement savings as a major risk.
Like health care risk, longevity risk is still there, whether stock prices recover, continue falling or just drift along.
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