About two in three advisors say their clients have been more apt to reach out to them due to concerns about recent market volatility in the wake of the coronavirus outbreak.
The American College of Financial Services recently surveyed Retirement Income Certified Professionals (RICP) to determine how their clients reacted to the significant roller coaster in the stock market last week and found that the majority of clients show heightened concern, and of those, a majority (68%) are either in retirement of 1-5 years away from retirement age.
Additionally, half of clients indicated they are more concerned about retirement security now than they were than last year. Even though clients are showing more concern, over 60% of advisors reported that none of their clients had made changes to their plan as a result of recent market performance.
With much uncertainty about what lies ahead with COVID-19, concerns of a looming economic slowdown have skyrocketed as last week the stock market weathered through its worst week since The Great Recession, shedding more than 3,500 points. The volatility rolled into this week as the Dow gained nearly 1,300 points Monday, its biggest single-day point gain ever; dropped 786 points Tuesday despite the Federal Reserve’s emergency coronavirus interest rate cut; and then rebounded again Wednesday with a 1,173-point gain on the heels of Joe Biden’s Super Tuesday showing.
“A late-cycle economy always brings an uptick in investor anxiety, but the recent market volatility from the coronavirus is really packing a one-two punch on retirees and near-retirees’ sense of security,” said David Littell, J.D., ChFC, Professor Emeritus at the American College of Financial Services and Co-Creator of the RICP designation. “However, the fact that a majority are leaving their plans alone to weather this storm shows that client confidence in our RICPs and the plans that they’ve built is strong.”
The College’s RICP designation is a certification for advisors focused on how Americans can generate secure lifetime income and build a lengthy retirement.
According to the RICP advisors surveyed, the strategies they employ to help clients build a plan that safeguards against market turmoil include:
- Stay in touch with clients through market volatility
- Advise them to build a floor of guaranteed income not subject to market volatility
- Use a cash reserve which can be tapped in a down market
- Create multiple portfolios for different time periods in retirement and make the longest-term portfolio the most aggressive
“Our findings show that our RICPs are wisely counseling their clients with the lessons that we’ve learned from history—that despite the stress that market volatility causes, investors are generally better off to stay the course with their strategy, as the downturn is reducing the stock allocation without any further need to sell,” said Wade Pfau, Ph.D., CFA, RICP, Co-Director of the Center for Retirement Income at The American College.
“This is not yet a black swan event,” added Steve Parrish, J.D., RICP, CLU, ChFC, RHU, AEP, Co-Director of the Center for Retirement Income at the American College. “We all knew that a virus could disrupt the markets, and even cause a panic. Our findings reiterate that unless you enjoy market speculation as a sport, there’s really no strategy to better insulate your retirement capital exposure other than to ride the market out—especially if you’re not yet retired.”
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