Advisory In A Time Of Crisis

David Hanzlik: Advisory In A Time Of Crisis

CUNA Mutual Group’s VP revisits the wisdom of ‘stay the course’ strategy and highlights the opportunities that exist during corrections… and the safety of guarantees

by P.E. Kelley

Mr. Kelley is the managing editor for this magazine. Connect with him by e-mail: [email protected]

The effect of market volatility can be disorienting, to say the least, to the point where you may have to proactively dissuade your clients from altering the plans they have in place. So, it is always good practice, but more so in times of crisis, to revisit and reestablish the goals that you have established for them. Moreover, market corrections, as we know, are arguably beneficial in the long run… if managed properly and in accordance with the strategies embedded in each individual retirement plan. 

We spoke with Dave Hanzlik, vice president of annuity and retirement solutions at the CUNA Mutual Group, who argues that it is precisely this kind of climate that will challenge the integrity of all that you do for your clients… and keep them focused on the big picture.

PEK: Advisors generally prepare their clients for volatility, which they may understand only in theory. What do you see investors doing now, in real time, as they try to navigate a substantial drop in equity values?
DH: It really depends on the strategy they have built. We find the people that have guarantees embedded in their strategies are much more settled versus those that do not. There is a lot of reevaluation of strategies, goals and risk tolerances right now. There is nothing wrong with that – crises tend to reveal the mettle of our strategies in all of us – but I caution everyone to take their time before making changes to their strategy. None of us could time the market three months ago, we still can’t today.

PEK: Investors also generally understand, again, only in theory perhaps, that volatility can be a time of buying opportunities. How do you help translate this idea while your clients confront anxiety and, for some, panic?
DH: We believe in the power of guarantees and simple to use & understand solutions. Focusing on solutions, annuities, that reflect these beliefs is our strategy for keeping our customers engaged appropriately throughout market cycles and crises. Absolute guarantees provide our customers the certainty they need to overcome anxiety and panic while sticking to their long-term plan.

PEK: Does the current volatility, in your opinion, qualify as an actual ‘correction’ – and if so, what are some of the ‘irrational factors’ in play?
DH: At this point the Covid-19 crisis with the associated changes in social/economic interactions has driven our economy and market in really uncertain territory. Irrationality is always a factor in these times, but clearly a fact pattern exists that poses short and long-term dangers to growth and economic stability.

There is a lot of reevaluation of strategies, goals and risk tolerances right now. There is nothing wrong with that – crises tend to reveal the mettle of our strategies in all of us...

PEK: We see a lot of information coming out lately on ‘financial fitness’. What are some of the key focal-points, in your view, of this concept and how do you covey this idea to your clients in a meaningful way?
DH: Know yourself, understand your real values, understand you real goals and develop an appreciation of the subtle/not so subtle points that you need to navigate to a financially secure retirement. We focus on behavioral finance which points to these concepts of zeroing in empathetically helping people concretely focus on their real goals.

PEK: You’ve stated in your outline that ‘What was true two months ago still holds true today’. This belies a more positive attitude toward the actual health of our economy, and our markets, the current CoronaVirus scare notwithstanding. Is this sound advice to give clients, and are they embracing the underlying wisdom to hold the course?
DH: Absolutely, with one caveat. People may have personal circumstances that have changed substantially. That isn’t in reference to the real fear, anxiety and concerns related to the virus and impacts on the economy. Those are real, but shouldn’t change your long term course – crises are all unique and inevitable. People need to continue to maximize savings, uses guarantees, avoid speculation, etc. Personal circumstances may have changed – a job loss, business loss, a substantial health care event, etc. These are unique circumstances that could require pivoting and make sense to react to.

PEK: What are some of the ‘crisis management’ investors might consider, with regard to reallocation during such volatility?
DH: If someone is truly experiencing a crisis of cash management – due to job loss, business loss, a substantial health care event, etc. – this can certainly call for reallocation examination. That is hopefully the exception rather than then the rule and should be considered as such. Don’t overreact. Keep a focus on the long-term and stick to your plan.

PEK: Does the annuity solution tend to make more sense to clients/investors during times like these? What are the key selling points?
DH: Wow – the answer is truly nuanced here! For most people annuities are critical right now. Solutions providing absolute guarantees – for growth and/or income for life – are crucial right now. These are crucial in all circumstances. Times like these highlight the importance of these solutions.

For investors – I define as those with the capital and knowledge to make decisions maximizing value outside of individual circumstances and concerns – annuities hold unique value. Absolute guarantees – growth and income for life – are not available in the open market. Annuities can be leveraged to bring benefits to investors for sure. Annuities are designed for people ultimately – high net worth to working class – the ability to create guarantees, absolutely suited for the crisis of today and to provide certainty in all markets, create significant value for those focused on the long-term.