Uncertain, afraid and powerless: How to turn around investors’ grim views of retirement
Several recent surveys, including our own June 2012 Financial Professional Outlook, point to investor uncertainty about the markets and a general mood of pessimism about their financial prospects for retirement.
We found, for example, that while 76% of advisors say they are bullish about the capital markets looking out over the next three years, only 21% say clients share their optimism. The majority of advisors (58%) say their clients are uncertain about the markets. This is the highest level of client uncertainty since we began asking the question in November 2010.
Advisors also told us that running out of money in retirement is a popular topic among advisors (38%) and investors (34%). It registered as the second most common topic initiated by advisors and tied for third among investors. The fact that advisors and investors are even having this conversation is a positive sign, in our opinion. We think the sooner these kinds of discussions can occur, the sooner advisors can address any potential shortfalls while there is still time to act.
It seems concerns about retirement are not only a domestic issue. A recent study funded by Dutch insurer Aegon, and conducted in the United States and Europe, found that 71% of the 9,000 people surveyed believe future generations will be worse off than their parents.1
Economic woes throughout Europe have led authorities to caution workers that they will need to work longer and save more in order to sustain their quality of life. European companies and governments are now facing the reality of slowing economies. Unemployment is high in many countries and belt-tightening will surely affect pension systems at some point. It’s very similar to the challenges the U.S. must address with Social Security. How to generate retirement income is truly becoming a global issue.
Adding fuel to the fire, a recent Gallup Poll2 found that “57% of investors say they feel they have little or no control over their efforts to build and maintain their retirement savings in the current environment.” None of this is a complete surprise. These are tough times for many of those nearing or in retirement. However, we think the current challenges can be seen as opportunities for advisors.
With interest rates hovering near historic lows, investors of all shapes and sizes need advice on where and how to generate retirement income. Beyond that, investors need help developing achievable financial plans that account for their liabilities, as well as their assets.
This all comes back to the idea of empowering clients by helping them understand what’s really within their control. We know your clients watch TV. We know they worry about market volatility, the Fed’s next move and the Eurozone. We also know their worries won’t help their cause. But having that detailed plan and revisiting it regularly can help pull them back to reality. So can a flexible approach to spending and setting realistic expectations. These are admittedly simple things, but they can go a long way in helping ease many client concerns.
1“Survey finds gloomy attitudes toward retirement” by David Jolly, The New York Times, June 7, 2012
2“Investors still feel powerless over retirement savings” by Dennis Jacobe, GALLUP® Economy, June 15, 2012