Taming the risk of market volatility is a must for investors – Insurance News

According to Allianz Life Insurance North America’s Q3 2024 Quarterly Market Perception Survey, most Americans want to reduce risk in their financial strategies and strengthen their portfolios to avoid future volatility. In fact, a whopping 73% of Americans said they would stop working with their current financial professional if they hadn’t helped them reduce their exposure to market volatility.

Many Americans are risk-averse market volatility According to the survey, most Americans (51%) said they have changed their investments to make them less risky or more conservative because of market volatility.
Millennials are particularly concerned about market conditions. More Millennials (58%) said they have changed their investments to make them less risky or more conservative, compared to 46% of Gen Xers and 41% of Boomers.

I am looking for protection

Additionally, according to the survey, a majority of Americans (59%) said they are looking to add more protection to their portfolios after recent market volatility. Again, Millennials are more likely than Gen X (60%) and Boomers (47%) to say they are looking to add more protection to their portfolio after recent market volatility (68%). Many worry about continued instability and a potential economic downturn. Nearly three in four (74%) worry that the upcoming election will cause more market volatility, and 49% worry that another major market crash is on the horizon.

“Americans are feeling anxious because of the recent market volatility,” said Kelly LaVigne, vice president of consumer research, Allianz Life Insurance Company of North America. “A well-constructed financial strategy that can withstand market ups and downs can help Americans avoid the fear of short-term market swings.”

What is a well-constructed financial strategy?

And what are the characteristics of a well-constructed financial strategy? “A well-designed financial strategy,” LaVigne explained, “will help your clients achieve a successful retirement with a level of protection, risk tolerance and built-in contingencies — especially for those ‘unplanned events.’

That, LaVine added, starts with identifying the client’s long-term financial goals, their risk tolerance, and then laying out additional steps and alternatives to reach the goal.
“The hallmark of a strong financial strategy is that it will identify the risks — inflation, longevity, market volatility — and how the strategy addresses those risks,” LaVigne said. “The strategy will also show how clients will use their retirement assets to generate retirement income and the likelihood of success for that withdrawal plan.”

Helping clients with market volatility

One of the main goals of financial professionals is to help their clients manage the risk of market volatility, especially as they approach retirement and retire for the first time (the fragile decade), LaVigne said.

First, it is important for financial professionals to keep their clients informed – even during periods of volatility – by preparing them for such an event and considering it during the planning process.
“The goal is to keep clients from selling out of fear when the market goes down, and to provide some contingency to successfully navigate and mitigate volatility,” LaVigne said.

Financial professionals can also help their clients identify products that offer some level of downside protection in their portfolios, LaVine added. Depending on the client’s risk tolerance, products such as fixed index annuities or registered index-linked annuities can offer some level of protection against market downturns while still offering the potential for growth. Buffered exchange-traded funds (ETFs) can also offer growth opportunities with some level of protection, LaVine added.

After recent market volatility, more Americans plan to contact their financial professional, according to a survey. About three in five (61%) said they have recently consulted or plan to consult their financial professional because they are concerned about recent market conditions. This is up from 51% in the second quarter of 2024.

In August 2024, Allianz Life conducted an online 2024 Q3 Quarterly Market Perceptions Study with a nationally representative sample of 1,005 respondents aged 18 and over.

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