The financial goals of American consumers have shifted noticeably in the past six months as the markets roiled beneath them, according to a study recently released by Axa Equitable Life Insurance Company. The study is a timely indicator of just how profound the changes in investor outlook have been, and portray real opportunities for life insurers, as income guarantee and protection take center stage.
Axa’s study revealed that consumer attitudes and behaviours of Americans have shifted dramatically in the past six months. Among the most notable results, almost eight in 10 of those polled, 78 percent, ranked income guarantees as a top financial priority, up 16 percentage points from a similar Axa survey conducted in April 2008.
Axa conducted the online survey in October last year among 400 randomly chosen US consumers who were between the ages of 35 and 70, with annual household incomes of $75,000 or higher.
The study also found that those placing a priority on protection from outliving retirement savings increased dramatically, from 59 percent six months ago to 71 percent in October. Securing protection against market conditions also increased considerably, with 68 percent ranking it as a priority, compared to a little more than half (53 percent) back in April.
“It is no surprise that attitudes and behaviours have changed, especially given the period of economic instability we are experiencing,” Barbara Goodstein, executive vice-president and chief innovation officer for Axa Equitable told LII.
“What is striking, however, is the heightened priority being placed so quickly on securing a stream of lifetime income.”
Guarantees take centre stage
Goodstein said the increased focused on protection from outliving retirement savings is noteworthy, and the amount of the increase in focus on longevity and protection caught the insurer’s attention.
“This validated many of our assumptions going in; that the annuity product set, particularly guarantees, would be critically important,” she said. “What it has done is get us moving even faster.”
The study found that slightly more than half of those polled (54 percent) said that they have not made financial changes, nor do they intend to do so. For the 25 percent of those who have thought about doing something, the actions most considered included meeting with an adviser (62 percent), re- allocating investments (47 percent) or making withdrawals (24 percent).
Of the 21 percent that have actually taken action amid the volatility, 67 percent said they had reallocated investments, 56 percent bought products like annuities, life insurance and shares, and 24 percent made withdrawals from 401(k) or 403(b) retirement savings accounts or liquidated personal investments.
The study also found that of all the sources to learn about finances, almost half of those polled (48 percent) sought information from news and financial websites. Other preferred sources included newspapers (45 percent), financial professionals (35 percent) and magazines (15 percent).
Consumer perception shifted when polled on trust, as 61 percent ranked financial professionals the most trustworthy – 10 percentage points more than financial websites (51 percent) and 20 percentage points more than news websites (41 percent).
“The fact people are using the tools at their disposal to educate themselves is very encouraging,” said Goodstein.
“But more interesting is our study also illustrates that people still view the relationship cultivated with a financial professional as invaluable and better positions them to make sound decisions.
Axa takes advice online
To that end, Goodstein said Axa created MyRetirementShop.com, a lifestyle website for information and resources to help consumers redefine life in retirement. It is the company’s latest innovation on its At Retirement platform, committed to helping individuals near and at retirement make informed choices to enhance and preserve their lifestyle.
“We sensed a real need out there for actionable information on not just finances, but lifestyle, relocation issues, post-retirement employment and volunteer opportunities and all the information people approaching retirement might need,” Goodstein said.
Among the most compelling differences along gender lines, the study found that women are more concerned amid the current market turmoil about their retirement savings than male counterparts. Specifically, 84 percent of women polled rated having a guaranteed source of lifetime income as “extremely important,” compared to just 73 percent of men.
Women are also significantly more concerned about protecting retirement income from a market downturn as 75 percent viewed it as “extremely important”, compared to just 60 percent of men.
Ironically, although more concerned than men about the future, the study found women are less likely to make changes in response to current market conditions. Specifically, more than half of men polled (55 percent) said they had reallocated money in an employer-sponsored account, compared to just 40 percent of women. In addition, 29 percent of men have either withdrawn money from an employer-sponsored account or mutual funds, or sold stocks, compared to 19 percent of women.
“Women live longer, and they pay more in medical expenses, they earn less money on average, and four in 10 marriages end in divorce,” Goodstein said. “You put all those data points together and you see the need for marketing messages aimed at gender.”
Goodstein added that Axa was already honing its marketing message toward these gender differences. The insurer has begun a series of seminars aimed at women, developed marketing material for women who own small businesses and directed its sales staff to pay close attention to the difference in attention being paid by female clients.
“Women are focused on this issue, and we would be remiss if we did not respond,” Goodstein said. “We do not see a need to alter the product, but the marketing message has to reflect a difference in attitude.”