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A new survey suggests that many Registered Investment Advisors (RIAs) may be relying on increasingly outdated methods to protect their clients' retirement portfolios — even as the vast majority of Americans are worried about outliving their savings.
The "2022 RIA Protected Accumulation + Retirement Income Survey" from RetireOne® and Midland National Life Insurance Company was released Wednesday and reveals the opinions of 197 financial advisors polled in May and June. The results reveal that 82% of RIAs agree that clients are concerned about their retirement funds, and 64% agree that clients are concerned about retiring on time.
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What's more, 9 in 10 advisors say clients are anxious about inflation's impact on their retirement portfolios, while 70% are uneasy about the war in Ukraine and the impact of geopolitical instability on their nest eggs.
Even with all of these concerns, most advisors believe they have the tools necessary to address increasing client anxiety. Survey officials note, however, that only 4 in 10 respondents use income-planning software. When it comes to principal protection, 41% still allocate to certificates of deposit, 60% use money market accounts, and 49% keep clients in cash. Additionally — and despite inflation climbing toward 9% and the creator of the 4% rule calling for a revision to the commonly-referred-to rule of thumb — RIAs still rank unprotected methods for generating retirement income ahead of lifetime income solutions.
"For 12 years, markets performed extraordinarily well, and so did many advisors," David Stone, co-founder and CEO of RetireOne, a leading independent platform for fee-based insurance solutions, says in a statement. "Still, with lingering volatility, advisors are searching for another way to best serve clients. While they're hoping markets will come around quickly, it's become evident that in times of turmoil, advisors need to offer clients protection for the retirement portfolios that they've been nurturing for years."
Indeed, as the Fed hikes interest rates, annuities have become a more appealing retirement income strategy, especially with low-cost solutions that offer guaranteed lifetime income entering the market. Compared to RetireOne's 2021 survey, more advisors now say they would refer annuities to their clients should their needs be addressed by the features of a specific offering (65% in 2022 vs. 52% in 2021).
Nearly half of RIAs who use annuities cite guaranteed lifetime income as the primary reason they refer them to clients. In a recent whitepaper, written in partnership with RetireOne, Michael Finke of The American College of Financial Services outlines how longevity continues to improve for Americans — leaving the onus on advisors to ensure their clients don't outlive their retirement savings.
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