Wealth Management
A new study by Alliance for Lifetime Income and CANNEX is shaking the foundation of the standard portfolio construction which uses 60/40 equity bond split to simultaneously grow and protect/provide income. Investors in hypothetical allocation, 20% of their portfolio into equities 14% into real estate and annuities made up the next largest category of 13% followed by CDs, bonds, and alternatives. This overwhelming support for annuities is interesting but even more intriguing iis that nearly 85% of investors were interested in a lifetime guaranteed income annuity or already own one. Advisors should hear their clients desires for annuities rather than push the traditional portfolio allocation. The increased interest in annuities is a growing trend for investors and will be a more prominent feature in the average portfolio.
FINSUM: The pandemic and the current financial landscape has upended what many investors thought of as a safe asset, and guaranteed income (even at a cost) is worth it for many.
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Environmental, Social, and Governance standards have, up until this point, been an opt-in style strategy to give an edge in debt and equity markets, but that could all be changing. The CEO of Norges Bank Investment, the world's largest stock owner, says that corporate life is only going to be more difficult for firms that don’t meet ESG standards. Market pressures are going to rapidly change and firms will have a difficult time raising finances, maintaining employees, and retaining customers if they aren’t part of a green future. Norges plans to utilize its market power to apply a lot of pressure, one such way is by giving companies expectation documents. They believe companies won’t be profitable in the long run if they don’t commit to ESG.
FINSUM: This strategy of pressuring companies through divestment has been shown to not necessarily be effective in holding them accountable and transitioning them into a greener world.
Sweeping changes to the financial regulatory landscape are coming quickly. Stemming from changes to the interpretation of a Trump-age exemption are widening the regulatory umbrella. The U.S. The Labor Department is pushing a variety of accounts including annuities to be included in this expansion. Hidden and/or lofty fees in these areas are the source of the concern and lawmakers want the ‘best interests’ of investors in mind. Many companies are sprinting to align themselves with the regulation. Complying will include recordkeeping requirements, new policies and procedures, and new disclosures.
FINSUM: The drastic changes to regulation will really start to come in at the start of the year, and could monumentally alter the annuities market.