Investors Increasingly Drawn to Lifetime Income
Thanks to Harry Markowitz’ Modern Portfolio Theory, the 60/40 portfolio has been a widely appreciated investment strategy. It makes sense. Put most of your money in stocks for growth and diversify by allocating a chunk of it to bonds for stability and protection.
But we’ve been experiencing an extended period of economic uncertainty fueled by the pandemic, and bonds haven’t been a sure bet for a long time. Real yields have been negative for at least a decade, with no signs of improving.
Consequently, a recent study from Alliance for Lifetime Income and CANNEX reveals that investors appear to be more interested in something else that can offer reliable income and asset protection: annuities. According to Alliance for Lifetime Income CEO Jean Statler:
“We believe this is yet another blow to the outdated 60/40 portfolio mindset. Our research continues to show growing interest and significant demand from consumers for protected income, as more Americans become educated about the lifetime income, asset protection and other benefits of annuities.”
Despite this increased interest, many financial advisors appear to be a bit out of synch with their clients’ wishes. According to the study, while a full 85% of investors were interested in or already owned annuities with lifetime income, only 18% of financial professionals believed their clients were interested. That’s a wide gap that may be symptomatic of a larger problem: listening, or a lack thereof.
As part of the study, both investors and advisors were asked to allocate $1 million to build their ultimate portfolio. Investors allocated 13% to annuities, while advisors allocated 18% to annuities. It’s clear then that advisors see the value of annuities to provide some ballast for client retirement savings, but for some reason appear to be miscalculating their own clients’ interest in them.