Study: Those with $200,000 in Investable Assets Say Volatility Drives a Desire for Balanced Approach
MINNEAPOLIS – Sept. 23, 2013 – The vast majority of Americans ages 25+ with more than $200,000 in investable assets surveyed in the Allianz Life 2013 Investor Market Perceptions Study* said they are seeking some form of protection from losses as they accumulate assets for retirement. In total, 95% of these respondents said they would like a financial product with no potential loss or at least some level of protection from loss rather than one with unlimited potential growth but also unlimited potential loss. More specifically, more than three quarters (76%) said they would prefer a product that offers a balance of potential growth (up to 10%) with a level of protection that shelters them from up to 10% of losses.
The majority of survey respondents have grown weary of market volatility. Despite a 1,000+ point gain in the S&P 500 Index between March 2009 and August 2013[i], investors appear to remain hesitant to put money at market risk as nearly $8 trillion still sits in cash[ii]. The study further exposed this hesitancy as more than three quarters (79%) of respondents said they believe the market will continue to be volatile, and nearly six in 10 (59%) noted market volatility as an economic concern having an effect on their retirement outlook.
“It’s clear that for many investors the trauma caused by the 2008 financial crisis is still being felt and is dampening their willingness to take on risk with their savings,” said Allianz Life Financial Services, LLC President Robert DeChellis. “Although we’ve seen strong equity markets this year, volatility remains a constant concern. With fixed income investments offering disappointing returns, there is a strong need for solutions that can provide solid upside potential but also protect against some of the downside risk that is keeping people from participating in the market.”
As they relate to retirement, beliefs that market volatility will continue were consistent across age ranges with at least three quarters of Gen X/Gen Y (25-44, 82%), baby boomers (45-68, 80%), and older investors (69+, 75%) surveyed sharing that opinion. In addition to fears about equity markets, the survey also found these investors are unhappy with returns from less volatile investments. More than six in 10 (62%) of investors surveyed said they are challenged to find sufficient yield/return in today’s low interest rate environment.
Balanced Approach for Tapping Idle Cash
Continued market volatility was identified in the survey as a barrier to investing today – more than a third of respondents (38%) noted it was preventing them from investing idle cash. Wealthy investors indicated they want to put their money to work with a product that offers a balance of protection and growth.
When asked what they would do with $20,000 in idle cash today, more than six in 10 (63%) respondents said they would “invest today in a product with a balance of protection from loss and growth potential” – three times the number who said they would “invest today in a product with high growth potential” (20%) or “wait for the market to stabilize before investing” (11%). This echoes their top priority for retirement planning, as 84% of respondents agreed with the statement that “you should always have some kind of protection from loss, even if it reduces your potential gains.”
“Although consumers are still nervous about the market, they also want to move idle cash off the sidelines, provided they have some form of safety net. A retirement product offering a balanced approach seems to be the preferred course of action for the current market environment,” added DeChellis.
Strong Preference: Guarantees
In addition, when asked which financial product is more attractive – one with a 4% return that is guaranteed not to lose value or one with an 8% return, but with the possibility of losing value due to market downturns – 70% of respondents chose the 4% product with guarantees. This response rose to 72% for those indicating they work with a financial professional.
About Allianz Life
Allianz Life Insurance Company of North America, one of FORTUNE’s 100 Best Companies to Work For in 2013, has been keeping its promises since 1896. Today, it carries on that tradition, helping Americans achieve their retirement income and protection goals with a variety of annuities and life insurance products. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with 142,000 employees worldwide. More than 78 million private and corporate customers rely on Allianz knowledge, global reach, and capital strength to help them make the most of financial opportunities.
*The Allianz Life 2013 Investor Market Perceptions Study was conducted by Ipsos via their online iSay/Ampario Panel from July 24-29, 2013 with 1,012 panel respondents age 25+ with investable assets of $200,000 or more, and was commissioned by Allianz Life Insurance Company of North America.