Proactively addressing clients’ concerns about market volatility can help build trust and deepen relationships. Are you reaching out with strategies to help keep clients invested?

Turbulent markets can panic investors, especially those who are nearing or newly in retirement and needing to take income from their savings. Fear can cause investors to make rash investment decisions that may not be in their best interest. Here’s how to help clients stay the course using a variety of tools.

Calming the Waters 

The first thing to do is to reach out and let clients know you are there, monitoring their situations, and implementing measures to help ensure they can still achieve their goals. Explain that market volatility has always been part of the long-term investing journey, and review risk mitigation measures you already have in place. Alongside that, there are other strategies you can use to keep them on course. 

What Strategies Are Available?

The following approaches may help clients navigate volatile markets.

1. Consider de-risking to protect assets, particularly for those close to starting retirement income, or who may have started recently. These are the clients with the most at risk because they don’t have an extended period of time to recover losses. Annuities can help play a role here, along with other investing strategies. 

• Fixed indexed annuities offer the potential for upside market participation without investing directly and while providing a “no-loss” guarantee.
  
  
• Registered index-linked annuities can potentially capture more of positive market returns, also without investing directly, in exchange for limiting (but not eliminating) downside risk.
  
  
• Variable annuities, while invested in the markets, may offer principal-protection or income-protection optional benefits that can help ease clients’ concerns.
  
  
• Consider option-based strategies to hedge against market downside risks. 
  
  
• Utilize equity strategies that seek to reduce risk.

In a down market, these strategies will tend to preserve assets versus grow them, and they can involve a cost. But growth can happen, of course.  

2. Use the first “bucket” in a traditional time-based segmentation strategy—cash or low-risk liquid assets— to ride out markets. Clients who have several years of cash on hand to cover current spending are more likely to ride out market swings and stick to their plans.

3. Use a flooring strategy. This involves securing predictable income streams. Building an income floor in retirement typically starts with an honest assessment of spending and then breaking that down into a spectrum of needs and wants. Investors cover their needs with this predictable income floor. Typically, existing sources such as Social Security retirement benefits and available pensions are the building blocks for an income-floor strategy. However, if there is a shortfall—and there often is—a variety of strategies utilizing existing assets can be used to provide additional income:

• Income annuities—single-premium immediate annuities (SPIAs), deferred income annuities (DIAs), and qualified longevity annuity contracts (QLACs)
  
  
• Optional income benefits (GMWB)
  
  
• Bond/CD laddering
  
  
• Going back to work, continuing to work, or working a second job
  
  
• Rental income 

4. Discuss potential income/spending adjustments, possibly temporary. This typically means keeping a current withdrawal-income strategy, but choosing to live on less, such as taking smaller withdrawals to minimize drawdown in a down market. While some are willing to make these sacrifices, many are not or are unable to as necessary expenses (housing, healthcare, food, and taxes) can’t be reduced.

Build Stronger Relationships Today 

Remember, solid relationships are built in volatile markets when you reach out to your clients first, versus waiting for them to reach out to you. Go into these conversations with the tools to help reduce clients’ concerns, and reinforce why they chose you to help them realize their retirement visions.

ACTIONS YOU CAN TAKE RIGHT NOW

• Reach out to your clients before they call you.
  
  
• Assess whether de-risking may help preserve assets for certain clients through periods of high volatility.
  
  
• Talk to your Pacific Life consultative wholesaler about annuity strategies that can help limit or eliminate losses and/or be a part of a flooring strategy.
  

Additional Resources and Links

Buckets for Bears—Annuities Can Help

Insuring Investments In A Time of Crisis

Understanding the Role of Protected Income in a Flooring Strategy

For more information about retirement-planning, please contact our Retirement Strategies Group at RSG@PacificLife.com or (800) 722-2333, ext. 3939. PacificLife.com

This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. Information is based on current laws, which are subject to change at any time. Clients should consult with their accounting or tax professionals for guidance regarding their specific financial situations.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. 

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This material is educational and intended for an audience with financial services knowledge.

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