Although most Americans aren’t directly invested in individual stocks,
more than half have some level of investment in the market — mostly
in retirement accounts such as 401(k)s*. Soon after the coronavirus
outbreak took hold in the United States, its economic implications
may have left some clients rethinking how much risk they’re willing
to take with their hard-earned savings.
Thinking about risk differently
With shocking market volatility still fresh in people’s minds, financial professionals
have a valuable opportunity to learn about clients’ real risk tolerance. It’s one thing
for clients to answer hypotheticals about saving and losing money, but watching
their retirement account balances that have accumulated for years tumble in volatile
market conditions sheds light on the real-world implications.
Asking clients how they felt about this year’s stormy market conditions starts the
conversation about how much risk they’re comfortable taking moving forward.
From some — especially clients in or nearing retirement — you may hear a desire to
dial back on portfolio risk. Two recalibration strategies worth considering include
increasing fixed-income allocations or annuitizing a portion of the portfolio.
Reducing exposure to volatile markets and capturing income guarantees may
help clients feel more confident about staying on track for the long-term.
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