IRI study: Consumers seek secure income, asset protection

Consumer’ prolonged concern about inflation and retirement income is leading them to prioritize income protection over maximizing growth, according to new research by the Insured Retirement Institute (IRI).

For financial advisors, insurance agents and similar professionals, this could signal a need to adjust business strategies to better meet clients’ goals in a rapidly evolving economic landscape.

IRI’s Vice President of Research Frank O’Connor told InsuranceNewsNet that the research suggests clients want to protect themselves against a major, unexpected financial crisis cutting into their retirement income.

He said some moderate interest in growth is expected as clients need that growth to keep up with inflation but explained that their primary concern is protecting that growth.

As such, he said it follows that they seem most interested in downside protection and guaranteed income, “both of which are available through annuities.”

“Balanced portfolios, diversification, these are all tools that can reduce the impact of a significant decline in financial markets but can’t prevent it [and] can’t protect against it,” O’Connor said. “The only thing that can actually protect against it is an annuity, is some type of an insurance product.”

IRI findings highlight asset protection

IRI published its findings in a report entitled “Advisor Views on Client Goals, Concerns and Preferences,” the three-page brief of which detailed key findings as well as possible implications for financial advisors.

“The results of the survey can be summarized in one short phrase: clients want advisors to help them secure income and protect assets,” IRI’s report concluded.

The study did not survey consumers directly but assessed the perception advisors have of their clients’ goals, interests and needs. Eighty-two percent said their clients are most concerned about securing their income; and 65% are most concerned about asset protection. In comparison, just 53% seem most concerned about asset growth.

Advisors noted that their clients are still interested in investment products with growth, but at a lower level than they are interested in more protective measures. Fifty-five percent said clients have high interest in investment products with downside protection, overshadowing high interest in any other category. Conversely, an equivalent 55% have moderate interest in maximized growth.

Annuities as a solution

“For an advisor who doesn’t use annuities, there are other ways to mitigate some of these risks, but not guarantee against them,” O’Connor said.

“So, I think whether or not the client chooses to purchase an annuity, it’s a missed opportunity to not talk to the client about what annuities can do for their portfolios…That’s a missed opportunity to do something for the client that is in line with their goals.”

Several advisors told InsuranceNewsNet that they have seen an increased interest in annuities among their client base, and most said they plan to adjust accordingly.

Danny Ray, founder of PinnacleQuote Life Insurance Specialists, said, “I believe current uncertainties make people value security more, and I'm adjusting to provide clearer guidance on annuities.”

Several others agreed, but Evan Tunis, president of Florida Healthcare Insurance, took a more nuanced approach. “Annuities can be a great addition to one's portfolio, but they are not appropriate for everyone,” he said, adding, “It is important to evaluate each client on their individual financial situation.”

On the other hand, Rob Drury, executive director of the Association of Christian Financial Advisors, described the increased interest as something of an expected knee-jerk reaction to a volatile market.

Drury said his business has no plans to adjust their strategy, adding, “My philosophy will always be to apply the correct product or methodology to fit the situation.”

Future considerations for annuities

O’Connor and several of the insurance advisors suggested that it would not be surprising to see continued interest in annuities given the United States’ aging population.

Inflation was highlighted as one of the major reasons for the shift in consumer sentiment, but this secondary factor of age is likely also playing a major role in a way that advisors should pay attention to going forward.

“The baby boomers are almost all fully retired, and Gen X is right on their heels,” O’Connor commented. “So, you’ve got a large number of retirees [and] some of them no longer have earned income. They are going to be very concerned about anything that erodes their purchasing power.”

IRI conducted an online survey of 188 financial advisors who have at least one year of experience and who have sold at least one annuity within the last year. The survey was conducted between May 5 and June 15, 2023.

 

Rayne Morgan is a Content Marketing Manager with PolicyAdvisor.com and a freelance journalist and copywriter.

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