Longevity’s New Timeline

The Balancing Act of Retirement Planning

How advisors are navigating risk management and income generation

by Heather Kelly

Ms. Kelly is Senior Vice President of Advisory and Strategic Accounts at Allianz Life. Visit www.allianzlife.com

Retirement planning often feels like the ultimate balancing act. As a financial advisor, you must delicately walk the tightrope of protecting your clients’ assets from risk, while ensuring they’re able to generate enough income to last through retirement. All the while, there are seemingly countless pressures that may test your balance and push you toward a misstep.

In our inaugural RIA Retirement Risk Review study (view here),* Allianz Life Insurance Company of North America analyzed how advisors are viewing and navigating this precarious balancing act. Unsurprisingly, 88% of advisors report that it’s more important for them to protect their clients’ assets than to achieve the highest gains. However, nearly 59% of advisors note that clients need to accumulate more money in order to have a financially secure retirement but are too close to retirement to justify the exposure of investing in high-risk/high-reward financial products. This dual mandate has only become more complex in today’s historic low-interest-rate environment.

To help advisors successfully balance their way to a helping clients seek financial reassurance in retirement, let’s dive deeper into some of the specific threats facing pre-retirees and the solutions available to better mitigate these risks.

Beware The Longevity Risk

When evaluating the various threats to a client’s retirement security, one stands out most: longevity risk. 79% of advisors report clients — regardless of age — are concerned about outliving their money in retirement. With worries about inflation and the cost of living on the rise amid the economic recovery, longevity risk is only becoming more of a red flag for advisors and their clients.

Other threats to security vary depending on a client’s proximity to retirement. For clients who are more than 10 years from retirement, spending too much and running out of money, as well as health care costs, are cited as top concerns by advisors. On the other hand, clients with fewer than 10 years until retirement are more concerned about losing a lot of money in their accounts due to the stock market dropping.

Advisor respondents report high equity valuations pose the greatest threat to portfolios for clients who are 10-plus years from retirement...

Clients’ investment portfolios also face their own unique risks. Advisor respondents report high equity valuations pose the greatest threat to portfolios for clients who are 10-plus years from retirement, whereas longevity risk and low interest rates remain at the top of the list for those in or nearing retirement.

A Renaissance In Risk Management

Historically, bonds have served as the primary tool for risk mitigation in an investor’s portfolio. However, with interest rates at record lows for a protracted period, fixed-income allocations are no longer offering advisors and investors the income benefits they once did. Fortunately, risk management has entered a renaissance, presenting new, innovative solutions for advisors to better balance the dual mandate of income generation and asset protection.

Four in 10 advisors report considering new risk management solutions in 2021, including low-volatility ETFs, Buffered Outcome ETFs and annuities. For advisors looking to update their risk management toolbox, keep in mind that significant barriers remain when implementing new solutions. Top of mind for advisor respondents is the fear of sacrificing returns (28%), followed closely by cost and lack of familiarity, both at 22%. Annuities are also an important income and longevity financial solution for advisors to consider and leverage when creating a distribution strategy for clients. Today’s annuity options are far different than those in the past. Advisors can choose from myriad of options that comport to their business model (including both commissioned and fee-based options).

While the balancing act of retirement planning is certainly no easy task, you don’t have to walk the tightrope alone. Take advantage of the resources at your disposal and leverage the insight of trusted partners to help you move your clients toward a long, happy and healthy retirement.




Investing involves risk including possible loss of principal.
*Allianz Life and Zeldis Research conducted an online survey in February and March of 2021 with a nationally representative sample of 289 financial advisors. Respondents included Investment Advisory Representatives (IARs) and hybrid advisors with five-plus years of experience, who make product recommendations to clients and have at least half of their business from individual clients, as well as more than $25 million in AUM. Among these respondents, 97% have more than $50 million in AUM.