In our second annual Risk Tolerance Tracker, we asked American investors how the events of the last six to nine months have shifted their views on risk. We uncovered insights on some top concerns of American investors, their current aversion to risk and some new opportunities for financial professionals.
Among the results, we found that nearly three quarters of American investors (73%) are very or somewhat worried about inflation impacting their retirement. Also, 61% are generally worried about their retirement income, which is consistent with our 2020 Risk Tolerance Tracker results. This tells us that when it comes to their retirement, investors’ concerns aren’t easing up.
Investors also noted their top concerns as inflation (81%), increasing health care costs (78%) and market volatility (64%).
Our CEO, Chris Blunt, said, “Our survey found external market conditions are primary concerns for American investors, and while it’s important for them to be aware of these changes, it’s also critical that they don’t panic — especially if their retirement is 20-30 years away.”
He also said, “An advisor can help people figure out what really matters, design a roadmap and solutions to provide peace of mind around unexpected risks, and help them avoid reactive decisions that can damage their long-term financial plan.”
Still avoiding risk — though slightly less so than in 2020
Our Risk Tolerance Tracker also found that American investors are still risk averse when it comes to their finances — based on the events of the last six to nine months — although slightly less so than a year ago.
In 2020, 74% said they were less likely to take financial risks, and this year we found that 69% of investors still feel this way. This underscores how most American investors continue to avoid unnecessary financial risks following the COVID-19 pandemic, even in the face of the vaccine and easing of certain restrictions nationwide.
Interestingly, this trend around risk aversion was consistent across generations:
67% of Gen X
70% of Baby Boomers
New opportunities unveiled
Over a third of investors (36%) said they would be more likely to explore a new financial product they haven’t used before post-COVID-19 than they were prior to the pandemic — compared to only 28% in 2020.
Despite this growing interest in new investment vehicles, only 15% of respondents say they own an annuity. Even among Baby Boomers, the generation closest to (or already in) retirement, only 22% own annuity.
This tells us that while American investors are generally open to new products, it’s still challenging to increase the adoption of products like an annuity.
Majority of American investors aren’t working with a financial advisor
While there’s a variety of worries related to retirement, a majority of American investors (61%) say they don’t currently work with a financial advisor. However, those who work with an advisor are nearly twice as likely to feel “very prepared” for retirement as those who don’t work with an advisor, according to recent data from SRI.
When asked why they don’t work with an advisor, respondents said the top reasons include the following:
In response, CEO Chris Blunt said:
“While investors remain risk averse, there is increasing openness to new financial products. We expect this trend to continue — and even accelerate — as we move into 2022. As investors decide how to move forward, they should talk to an advisor about annuity options that can help reduce risk and address their top concerns around market volatility, inflation and high healthcare costs. An advisor can help guide investors through the decision-making process and help them build a plan that meets their individual goals.”
Talking with a financial and insurance professional can help you turn your retirement aspirations into reality. Get in touch with a financial and insurance professional today.
This CARAVAN survey was conducted by ENGINE INSIGHTS among a sample of 1,463 adults 30 years of age and older. In order to qualify, respondents had to have sole or shared financial decision-making responsibility for their household and own financial products valued at $10,000 or more. The online omnibus study is conducted three times a week among a demographically representative U.S. sample of 1,000 adults 18 years of age and older. This survey was live on September 16-23, 2020. Completed interviews are weighted by five variables — age, sex, geographic region, race and education — to ensure reliable and accurate representation of the total U.S. population, 18 years of age and older.