RIAs seeing increase in client anxiety over retirement plans, survey shows

Recent market volatility is causing concerned clients to phone their RIAs with worries about whether they will be able to retire as planned. With the largest cohort in American history turning 65 in 2024, a new study shows the calls — and the anxiety — are only going to increase.

The RIA Protected Accumulation + Retirement Income Survey released Wednesday by insurance platform provider RetireOne and insurer Allianz Life showed that clients are increasingly worried about their retirement prospects and the level of financial security they can achieve during their golden years.

According to the study, 97% of investment advisor representatives of RIA firms cite client concerns about the impact of inflation on their retirement portfolios. Furthermore, 85% say their clients expressed apprehension about the adequacy of their Social Security benefits. On top of that, 63% of respondents believe their clients worry that employer-provided retirement benefits may be insufficient.

Meanwhile, lower return expectations are presenting their own planning headwinds. The study showed 48% of respondents expect long-term U.S. equity returns to be 2 to 4 percentage points off historical averages, and 7 in 10 predict the same for fixed income.

The overall pessimism may account for the more than a third of the survey’s respondents who think the safe withdrawal rate is actually less than the well-known 4% level established in William Bengen’s research.

“Given the ongoing risks to a retirement income strategy like inflation and market volatility, it is not surprising that so many respondents say their clients are asking about how to protect their income in retirement,” Corey Walther, president of Allianz Life financial services, said in a statement.

According to the study, 59% of the advisors who responded allocate at least a portion of client portfolios to annuities for decumulation both for lifetime income or as a substitute for fixed income.

That said, a majority of respondents said they are likely to recommend or refer advisory annuities to clients, but nearly a fifth are reluctant to do so as a result of concerns about fees, liquidity, opacity, and complexity.

“Fees, ROI and liquidity are top-of-mind concerns with annuities,” said Andrew Fincher, certified financial planner with VLP Financial Advisors. “Market volatility is always amplified in the short term but the most successful, long-term investment strategy has shown to be an appropriate asset allocation of equities and fixed income based on a client’s risk tolerance.”

One way to get advisors to recommend more annuity products to clients is by getting them to embrace outsourced insurance desks, the study said. In fact, the survey highlights that 4 in 10 respondents may not know that utilizing advisory annuities doesn’t require an insurance license if they partner with an OID.

Steve Stanganelli, certified financial planner with Clear View Wealth Advisors, said he shares the same concerns about the cost, complexity and fees of annuities noted in the survey. However, he said the offerings have “vastly improved,” with more insurance companies offering more options suited for the RIA or fee-only channel.