Keeping clients on track in an era of uncertainty

Uncertain times make it hard to plan for the future. And few of us have lived through times as uncertain as these.

Between the COVID-19 pandemic, social unrest and economic volatility, it’s no wonder that F&G’s inaugural Risk Tolerance Tracker, which surveyed nearly 1,500 American investors, found that 72% say the events of the last six months have made them less likely to take risks both personally and financially.

Of course, every good financial and insurance professional knows that without assuming a certain degree of risk, it’s impossible for a client to generate the income needed to retire. Unless advisers can prevent their clients from giving into fear now, it will be extremely difficult to get them back on track when these uncertain times finally ease.

Our tracker uncovered a few findings that can help financial advisers as they have these challenging conversations.

1. Women and men are reacting very differently. The COVID-19 crisis has had a significantly bigger impact on the willingness of women to take risks. This was seen across several areas, including their investment approach. Thirty-seven percent of men said they have shifted their asset allocations to be more aggressive during the past six months, compared with only 27% of women. Two in five women (41%) say they pursue only cautious or highly conservative investment strategies, in contrast to only 22% of men. This means advisers must tread even more delicately than usual when coaching couples through retirement planning.

2. People with children are ready to chase returns. Surprisingly, adults with children in the household are more likely than others to tolerate financial risks. More than half (51%) of investors with children in the household say they have shifted their investment allocations to be more aggressive, compared with only 23% of investors without children in the household.. This suggests that now is the time for advisers to reach out to parents or parents-to-be and talk about how much risk is appropriate when saving for college or other large, family-related expenses.

3. Investors are open to trying new things. The last six months have made many people realize that the “same old thing” isn’t good enough. One-third of investors say they are more likely to explore new types of financial products that they haven’t used before than they were prior to the pandemic. The younger the investor, the more open they are, with 52% of millennials, 46% of Gen Xers and 17% of baby boomers saying they are more likely to explore new financial products.

This represents an opportunity to open up a conversation about how to build a comprehensive and diversified financial plan that goes beyond a plain vanilla, 60% stock and 40% bond portfolio and includes insurance products that offer life-long guarantees -- a conversation that is not always available in a more volatile market. For example, only 15% of those surveyed are currently taking advantage of annuities.  

Fear is a natural reaction to stressful times. The most successful advisers look at what is behind their clients’ fears, then offer solutions that address not just their financial health, but also their peace of mind. In doing so, they can deepen relationships and offer new, creative solutions that solve for both the client’s long- and short-term well-being.

Chris Blunt is the president and CEO of F&G Annuities & Life.