While many are struggling with increased risk in client portfolios and the challenges of billing AUM fees on low yielding assets, a growing number of their peers embrace the income and downside protection features offered by annuities to solve these problems.
The survey, which polled more than 200 RIAs, measured advisors’ retirement planning attitudes and practices, their understanding of clients’ retirement income concerns & priorities, and their strategies for meeting client income needs.
The survey uncovered two factors that could be propelling advisors to up the share of client portfolios allocated to riskier asset classes: a growing dissatisfaction with their fixed income returns, and the fact that a significant portion of advisors are charging lower fees—or no fees—on fixed income assets.
“Even though the survey revealed a growing trust in annuities, a large number of advisors still over-allocate to equities and rely on riskier, investments-only strategies for income,” said DPL CEO and Founder David Lau. “Given this era of low interest rates and anemic fixed income, advisors need to update their approaches to meet client needs without exposing them to unnecessary risks in retirement. With many of their traditional investing tools no longer serving their traditional purposes, and with the quality and breadth of Commission-Free products readily available today, there are no excuses for advisors not to leverage these products for their clients.”
Other findings from the survey include:
- Over 70% of respondents were dissatisfied or very dissatisfied with fixed income returns, an increase of almost 15% from the previous year.
- 38% of advisors are billing clients a reduced fee or no fee at all on fixed income.
- 57% indicated they have been allocating more heavily to dividend-paying stocks (versus 46% in 2019) and 22% are using riskier credit investments (versus 17% in 2019) to fund income for clients.
- When asked if they would prefer an annuity that pays 6% guaranteed income for life (net of fees), while retaining cash value (until depleted by withdrawals) or a bond portfolio yielding 1.5%, the vast majority of respondents said they would take the annuity (up 13% over 2020).
- Purchasing an income generating annuity in response to clients’ reduced risk tolerance has become more common; the percent of respondents choosing this option increased from 9% to 22% since 2020.
The RIA Retirement Planning Survey Executive Summary and Key Findings is accessible here.
About DPL Financial Partners
DPL Financial Partners is the first and leading RIA turnkey insurance management platform that brings commission-free insurance solutions from a variety of the nation's top carriers to RIA practices. DPL has created a marketplace of commission-free insurance products that enables RIAs to incorporate insurance and annuities into their practices to more holistically serve their clients. Clients benefit from products that offer competitive pricing and fiduciary implementation rather than commissioned, sales-driven ones. www.dplfp.com