Technology Can Help Your Clients Start Planning for Retirement

Americans are worried about making the right decisions about saving and investing.

In fact, most are more afraid of running out of money than death.

The majority of Americans (61%) who participated in the 2023 Annual Retirement Study conducted by my company, Allianz Life Insurance Company of North America, said they are more afraid of running out of money than death

Many worry about saving enough or investing in the right assets.

At the same time, factors outside of their control, like market volatility and inflation, could also cause them to lose money.

Essentially, there is a crisis of confidence. Americans worry if the actions they are taking to prepare for retirement will actually work — or if they will work well enough.

Advisors can use tech to help clients feel more confident may be more successful.

Assessing Financial Trade-Offs

Everyone must make trade-offs when creating a long-term financial strategy.

A client's priorities can help make these decisions.

For example, some clients may choose to work longer, while others may choose to reduce their spending in retirement. Others may prioritize a dependable retirement income strategy over higher returns and the stress of market volatility.

Clients have four main controllable factors for their retirement strategy: retirement age, contributions, level of income needed and asset allocation.

Even if they retire later, contribute more to savings and withdraw less, they still face uncontrollable risks.

Advisors can use that fourth factor — asset allocation — to address risk.

Client Stress-Testing

Fintech can help advisors understand how a product and its features perform and how incorporating it into an overall portfolio would affect specific clients' probability of success.

This is particularly helpful when assessing trade-offs.

Clients today must ensure that they have contingencies built into their retirement strategies for concerns like longevity, taxes, inflation, and sequence-of-returns risk.

With the right kind of technology, advisors can stress-test financial strategies with some of these uncontrollable risks.

Advisors can demonstrate how products like annuities that are built to help mitigate the risk of longevity and market volatility would affect a portfolio.

Annuities support clients' efforts to meet their long-term retirement goals by offering tax-deferred growth potential, a death benefit during the accumulation phase, and a guaranteed stream of income at retirement.

Technology can also help advisors look beyond raw scores, to show the impact of taxes and other factors that contribute to the efficiency of a strategy.

This analytical process will demonstrate the value advisors provide for a client's financial strategy, by taking various risks to retirement into account and ensuring that all the pieces in the portfolio work together.

For example, an annuity can complement a client's other portfolio holdings by serving as an anchor, allowing the rest of the portfolio to stay invested in equities for long-term growth potential.

Keep in mind, however, that asset allocation does not ensure a profit or protect against loss.

Providing Comprehensive Financial Guidance

With fintech, advisors can provide comprehensive financial guidance.

Financial technology will help you take a holistic approach with your clients to look at all of their assets, not just the ones managed in their advisory accounts.

Creating a strong financial strategy is about more than any one product. The idea is to help your clients reach their goals for a smooth retirement and help clients overcome their lack of knowledge about retirement planning.

Consider the results of the Allianz retirement study.

The study was conducted online in February and March and reached a sample of 1,000 individuals ages 25 and older in the contiguous United States. To participate, the individuals had to have an annual household income over $50,000 if they were single or over $75,000 if they were married or partnered, or at least $150,000 in investable assets.

A majority of the participants (56%) didn't know where to start planning beyond having a basic retirement account like a 401(k) or IRA, according to the study.

Only 42% of the participants had a written financial plan.

Financial planning software can take some of the guesswork out of financial planning and help your clients get started with creating a written financial plan.

Schyler Adams is the advanced strategies and planning platforms director at Allianz Life Insurance Company of North America. He can be reached at [email protected].