Why clients really want to talk to their advisor about the weather

Weather is a common component of small talk, but few advisors would prioritize it in a retirement planning conversation with their clients. That could be a mistake.

Extreme weather events and other natural disasters are becoming more common and as well as impacting insurers, they are likely to drive up costs for consumers, something that could be particularly challenging for retirees on fixed incomes.

A new report from Allianz Life highlights the concern across age groups about how retirement savings may be affected by these events, with 56% of respondents saying they are anxious about factors including rising costs, financial losses, and even health effects. Millennials are most concerned (70%) compared to Gen Xers (53%), or Boomers (23%).

“We see extreme weather almost daily in the news,” says Lorinda Niemeyer, head of sustainability, Allianz Life. “As natural disasters become more frequent, more intense and more costly, Americans are waking up to how this could pose a risk to their retirement nest egg. It’s not just the recovery costs after a disaster strikes. For many, extreme weather is increasing daily costs of living, insurance costs and other ongoing expenses. And those costs are tough to absorb if we don’t plan for them.”

Despite 25% of respondents ranking concerns around rising costs, loss of insurance, or damages due to extreme weather or natural disasters being a risk to their retirement income – at least as concerning as taxes, debt, and caregiving responsibilities – only 10% have spoken about this with a financial advisor.

However, more than eight in ten said that having that conversation and including mitigation in their financial plans would ensure they will have the finances necessary to support what they want to do in life.

Those who have experienced financial loss resulting from an extreme weather event or natural disaster are less likely to have a written financial plan that includes protection from future risks (14%) than those who have not had this experience (48%). Specifically, 36% of those with experience have included the potential implications of extreme weather or natural disasters into their financial retirement plan compared to 12% who have not experienced this said the same.

“Extreme weather has the potential to erode wealth just like other risks to a retirement strategy like inflation and increasing medical costs,” said Niemeyer. “A financial professional can help create a holistic retirement strategy that addresses the financial costs and risks of extreme weather to help protect your financial well-being and overall lifestyle.”