Advisors: Don’t Let Clients Become Complacent Over Market Volatility

By Susan Rupe

After a volatile year in the markets, American investors ended 2019 feeling more confident about their finances than they have in a long time. According to the latest Allianz Quarterly Market Perceptions Study from Allianz Life, in the fourth quarter of 2019, worries about an impending market crash or recession were at their lowest levels since 2018.

In the fourth quarter, just 39% of respondents say they are worried about a big market crash on the horizon, and 43% say they are worried about a coming recession. These numbers had been steadily rising since 2018, before dropping after a relatively calm period in the markets in mid-November.

However, a sizable percentage of respondents are still staying awake at night over fears of a financial downturn, the study showed. Nearly 4 in 10 (39%) said they worry a bit market crash may be on the horizon. That’s down from a high of 48% in the third quarter. Meanwhile, 43% of Americans are worried a recession is right around the corner. That a drop from 50% in the third quarter.

“Interestingly, despite this current sense of calm, the number of people who say now is a good time to invest in the market continues to decrease,” said Kelly LaVigne, vice president of consumer insights, Allianz Life. “This may be because people are anticipating more volatility in 2020, and don’t want to take the risks that those major swings can have on their savings and retirement.”

LaVigne said the large percentages of consumers who are concerned about volatility put a renewed spotlight on guaranteed retirement income.

Nearly a third of respondents (31%) say putting some money into a financial product that provides a guaranteed stream of income in retirement is the most important step to take to help make sure they have a secure retirement. This is up from 26% last quarter.

Rising Inflation Risks

While people might be feeling better about reduced market risks to their retirement, risks from inflation are top of mind. Almost half (49%) of Americans say the rising cost of living is a big risk to their security in retirement, and over a third (34%) say that inflation may prevent them from ever being able to retire.

Millennials are most worried about the impact of rising costs, both now and in their future. They are more likely to say the rising cost of living is preventing them from saving money for retirement as much as they should (62%, compared with 56% of Generation X, and 42% of baby boomers). Millennials are also most worried about being able to pay for necessities like housing or medical care in retirement due to the rising cost of living (50%, compared with 46% of Gen Xers, and 35% of boomers).

“The rising cost of living is a real threat to hard-earned retirement savings, particularly as people are spending more time in retirement,” said LaVigne. “But less than four in 10 (38%) say they are confident that their financial plan can deal with the rising cost of living.”

The takeaway for advisors in this survey, LaVigne said, is that because there was no market downturn at the end of 2019, as some had predicted, investors and consumers were complacent about taking action on their finances.

“We had positive markets for record years now, but we know they won’t last forever,” he said. “We need to insure our clients lock in their market gains and protect those gains. Don’t allow your clients to get complacent.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.