Lately, I find myself taking the financial pulse of consumers when I have the opportunity to talk with them. The middle class has been of special interest since they’ve been in the news of late as being particularly frustrated with and fearful of the state of the economy.
A recent Gallup Poll found that consumers feel as bad about the economy as they did in 1992, another landmark presidential election year. Actually, I found that data surprising. While I know consumers have found it difficult to trust people in the financial sector since 2008, I had been getting the impression that, overall, your end clients were feeling better than they had in years.
I’d be curious to know, as you’re meeting with your clients and prospects, what kind of feedback they are giving you. Are you seeing them more receptive than they had been since 2008, less so or no change at all?
Anyway, as I said, that Gallup data was not really jibing with my own personal research so I looked at research from our own industry to get a better gauge. The IRI (Insured Retirement Institute) conducted a study on working-class Americans to get a better understanding of their financial needs and fears. Well, some of those same fears as seen in the Gallup Poll were present.
"The IRI research shows that working-class Americans are pessimistic about their financial future. More than one-quarter (26 percent) of middle class Americans ages 30-65 lack confidence that they will have the ability to meet their economic needs in retirement, while another four out of 10 (40 percent) state that they are only somewhat confident that they will have enough money to live comfortably in retirement."
With those fears in place, perhaps the safety net of safe investments are the best option, according to IRI research, particularly in regards to that middle-class segment, which is getting squeezed hard by taxes and shrinking 401(k)s. According to IRI research, "the tax deferral of annuity earnings is of greatest benefit to middle-income Americans, who comprise the largest segment of annuity owners."
Target a forgotten segment
The IRI data shows 80 percent of annuity buyers having incomes less than $100,000 and 64 percent earn less than $75,000. Those numbers give even more reason for advisors to target that forgotten middle class, instead of spending all the time and effort chasing the great white whale of the high net-worth prospects.
From that study, a couple of things the IRI is advocating caught my eye that I thought would be some final food for thought for advisors. The organization wants to:
• Ensure the Department of Labor (DOL) re-proposes its fiduciary rule in a way that achieves the proper balance between protections for consumers while preserving the capability of retirement tools for all Americans and;
• Protect the tax deferral status of annuity earnings so that those who need them most—working-class Americans—continue to have access to these heavily relied on investment strategies.