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What Financial Advisor Clients Value More Than Returns, and Why

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It won’t come as a surprise that when investors talk to their financial advisors, their top concerns these days are focused on inflation, market volatility and the possibility of a recession. And while any investor wants to maximize their gains, recent research published by the Insured Retirement Institute (IRI) indicates that right now, investors are more concerned about minimizing their potential losses.

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What the Study Shows Financial Advisor Clients Care About

One way to limit losses and smooth out retirement income is with the judicial use of simple annuities that offer a guaranteed stream of payments with no potential for losses.

“These findings reinforce the value annuities can provide to investors and the importance of annuities to financial advisors as a tool that can uniquely address the goals and concerns clients express most frequently,” said Frank O’Connor, Vice President of Research at IRI.

According to the survey, inflation was the leading concern clients were mentioning to their advisors, but that’s far from the only one. Here are the percentage of respondents that listed this and other concerns:

  • Inflation: 70%
  • Market volatility: 67%
  • Possible recession: 44%
  • Running out of money: 35%

While maximizing investment returns can be the primary focus of retirement investors during their early working years, once they’re approaching retirement or have left the workplace, their focus can shift to producing a stable, dependable stream of income. Of the top three investor goals the survey found that asset growth significantly lagged the desire for steady income:

  • Secure income: 82%
  • Asset protection: 65%
  • Asset growth: 53%

As expected for an organization focused on annuities, the IRI survey also asked about client priorities in the features offered by investment products. It subsequently found that, while interested in growth, investors didn’t want gains to come at the expense of income and asset protection.

  • Downside protection: 55%
  • Guaranteed income: 37%
  • Guaranteed growth: 35%
  • Maximized growth: 23%

One potential strategy to address inflation concerns is using annuities, bonds or other steady sources of income to stabilize some portion of income from a portfolio. This allows investors to add stocks and other more volatile assets that can provide the growth needed to keep up with the cost of living.

The question of growth and risk versus income and less risk isn’t a new question in investing. The investment company BlackRock recently suggested that investors could abandon the traditional approach of a balanced portfolio that mixes stocks and bonds. During their working years, the idea goes that investors should exclusively pursue growth, then shift to focusing on income-producing investments, such as bonds and high-dividend paying stocks.

Bottom Line

Retirement investors quite wisely need to focus on income, risk and stability as trio, and not simply the performance of their investments once they leave the workplace. This also highlights the ample planning that’s needed for people to have a safe and strong retirement. You may need advisors’ help with things like taxes, withdrawal strategies and more.

Tips for Finding a Financial Advisor

  • Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/SDI Productions, ©iStock.com/Hispanolistic

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