How many of your clients have asked if you think this market is due for a correction? Who is more concerned about it – your clients or you? I’m not saying that the party is over on Wall Street, but I do know the bears haven’t eaten in a long time.
My point is this: Every day that we let go by without taking some part of our clients’ gains off the table, the greater we are multiplying their risk. Yes, multiplying! Adding risk occurs when we change their asset allocation to a more aggressive mix. Multiplying risk occurs when we stack or compound risk factors, such as a market that hasn’t retraced gains in nearly five years with P/E’s nearing the range of the 1987 crash, coupled to an economy with the lowest employment rate in 39 years and a bond market that mirrors Japan’s 20 years ago.
I’m sure some of you will accuse me of fear mongering. That’s what those FIA guys do, right? Except I also wholesale three VA’s and a mutual fund family, and I have a Series 24.
So how do I suggest we proceed? I thought you’d never ask! To help take your clients’ gains off the table, Ash Brokerage has four distinctly different alternatives, one of which looks and feels a lot like a balanced fund with no downside risk. Please call us for ideas to help your clients avoid being bitten by the hungry bears.
Way back in the dark ages (pre-Internet), nearly 30 years ago, I earned my bachelor’s degree in psychology. Throughout my sales career, it has been enlightening and affirming to observe just how much of what we feel, believe and perceive is governed by our emotions. The investor experience is wrought with visceral emotion, much to the chagrin of those who do not seek any professional guidance. Human nature compels us to buy high and sell low.
When I studied for my licenses, I took batteries of tests, studying many terms and investment scenarios. Nowhere was there any mention of controlling investor emotions and expectations. As an advisor, you have to control two powerful client emotions: fear and greed. The overall strong 2013 stock market is a recent example, as some clients are now expecting higher returns and overall portfolio performance.
Now more than ever, it is important that you manage your clients’ expectations, along with their fear and greed. Fixed Index Annuities (also known as Equity Index Annuities) may be a great part of your clients’ portfolios, and they may address all three of these challenges.
Fixed Index Annuities remove fear from the equation with their downside protection. Zero is your hero when an index is way down on the anniversary date. The annual re-set creates a new starting point and upside opportunity for your client for the following year. When an index is up, you have satisfied their greed as long as you have set the proper expectations regarding the upside potential. Don’t make it complicated or confuse your client; remember that a fixed index annuity is simply a fixed annuity with a different way to credit interest.
Today’s fixed index annuity solutions have evolved tremendously from just a few years ago. Whether your clients’ require income, seek accumulation or are looking for bond alternatives and safe money vehicles, Ash Brokerage is ready to help you navigate the right course.
Understanding client behavior has always been an interesting – if not challenging – aspect of the financial planning process for me. Sometimes it seems that clients move in opposite directions from what logic would dictate. Client trends remain one of the most important pieces of knowledge we can possess when we meet with our clients and prospects.
A Towers Watson research paper released in May 2014 showed that consumer behavior has moved opposite of where we would typically think. Today, 62 percent of Americans would be willing to give up some current pay or salary for a guaranteed income stream in the future. While most companies are looking to take pensions off the books because they don’t help the recruiting process, the majority of Americans are looking for pension-like income. It appears we are not aligned with our clients.
The need for guaranteed income is a major shift from just five years ago. In the same survey in 2009, only 46 percent of Americans said they would give up some portion of their earnings to have guaranteed retirement income. Think about the time in which that survey was conducted – 2009. The financial crisis was fresh in everyone’s mind, defined contribution account balances had fallen as much as 40 percent, and prospects were bleak for economic growth. Yet, as most account balances have nearly rebounded, more Americans want guaranteed income.
Clients can no longer expect guarantees from their employers. With the PPA and proposed changes to PBGC premiums, it is unlikely that most employers will reinstate pension contributions. As planners, we must provide guaranteed solutions to our clients. We need to set aside our egos relative to money management and realize that our clients want some level of base, guaranteed income. Call Ash Brokerage for details on how to secure this kind of tax-efficient income for your clients.
According to a recent MarketWatch survey, 52 percent of retirees said they are pulling money out of their retirement accounts simply as the need arises – with no real plan in place. Most retirees fail to create an income plan, yet poll after poll suggests that their biggest worry is outliving their money.
So what advice are these retirees given?
The list of advice goes on and on ....
I say if you want to BE sure … INSURE. Consider an annuity with a lifetime income rider. This strategy GUARANTEES a lifetime income payment for as long as you live.
A client’s lifetime income payment is based on their annuity income base and their age when they decide to start lifetime income payments. Some annuities even offer an increasing lifetime payment opportunity. Most importantly, employing this strategy guarantees an income payment for life.
It is worth repeating: If you want to BE sure … INSURE!
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