TURNING RISK INTO OPPORTUNITY
Markets are unpredictable (shocking… right?). They soar one year and tumble the next. For retirees drawing, or about to draw, income from their portfolios, this unpredictability isn’t just inconvenient; it’s dangerous. It’s called Sequence of Returns Risk, and it can shatter retirement dreams if not addressed properly. But what if you, as a financial professional, could turn this risk into an opportunity? What if articulating this concept to your clients and getting them to act on it could set you apart and grow your business?
Well, my friend, read on because this blog breaks down the Sequence of Returns Risk, its impact, and how to talk about it with your clients so they take action.
KEY POINTS
- Timing shapes retirements. Early market losses while taking withdrawals can drain portfolios fast, even with good averages. Timing is everything.
- Clients don’t see the risk. Sequence of Returns Risk is invisible to most. Your job? Make it clear and actionable.
- Master the solution. Learn how to protect clients near and at retirement, simplify the message, and grow your business.
WHAT IS SEQUENCE OF RETURNS RISK?
Here’s the thing… the financial industry and our clients focus almost all their energy on accumulation. No shame there — just a fact. But those years leading up to retirement, and those first few years when the income stream is turned on, are extremely vulnerable.
So, Sequence of Returns Risk occurs when the order of investment returns affects the sustainability of a retirement portfolio. While the average return over time might look solid on paper, the timing of negative returns—especially during the early years of retirement—can dramatically impact how long a portfolio lasts.
For example, consider two retirees, both withdrawing $50,000 annually from a $1 million portfolio. They earn the same average return over 30 years, but one experiences a bear market early on while the other enjoys strong initial returns. The retiree facing early losses runs out of money far sooner, even though the averages are identical.
It’s not just about how much a portfolio grows; it’s about when those returns happen. And timing, in retirement planning, truly is everything.
THE STAKES: WHY SEQUENCE OF RETURNS RISK MATTERS
“Sequence of Returns Risk is one of the most critical, yet least understood, factors in retirement planning,” says Wade Pfau, Ph.D., CFA. “Negative returns early in retirement have an outsized impact on portfolio sustainability.”
Why does this matter so much? Because retirees rely on their portfolios to generate income. Withdrawals during a market downturn permanently reduce the principal, leaving less capital to benefit from future recovery. For advisors, it’s a double-edged sword: clients face the possibility of running out of money, and you face the erosion of trust and assets under management (AUM).
That’s where you come in. Financial professionals who understand and can explain this risk stand out. They don’t just protect their clients—they grow their practice and keep more of their AUM in the long run.
YOUR ROLE: TURNING RISK INTO OPPORTUNITY
As a financial advisor, investment professional, or insurance agent, you are your clients’ first line of defense against Sequence of Returns Risk. But here’s the challenge: most clients don’t grasp the concept. And why would they? It’s complex, technical, and far removed from the headlines they see every day.
An advisor who can simplify Sequence of Returns Risk is worth their weight in gold. It’s not about showing off your knowledge. It’s about translating it into something your clients can act on.
That’s why DMI’s hosting the upcoming webinar, “Sequence of Returns: Timing is Everything,” and it’s a must-attend event. You’ll learn how to:
- Explain Sequence of Returns Risk in simple, relatable terms.
- Quantify the impact of early negative returns for your clients.
- Position annuities and other solutions to protect client portfolios.
- Use customizable marketing tools to educate clients and close more business.
THE IMPACT ON INSURANCE AGENTS
If you’re an insurance-only agent, Sequence of Returns Risk presents a unique opportunity. Clients nearing retirement are worried about outliving their money. You can offer them solutions that provide stability and predictability, even in uncertain markets.
When you articulate this risk clearly, clients see the value of annuities—products that provide guaranteed income, regardless of market fluctuations. Agents who understand Sequence of Returns Risk can more effectively position annuities. This not only helps clients but also drives sales and compensation for the agent.
The upcoming webinar will give you the tools and strategies to:
- Address clients’ fears about running out of money.
- Showcase how annuities mitigate Sequence of Returns Risk.
- Close more sales by building trust and demonstrating expertise.
THE IMPACT ON REGISTERED REPS AND INVESTMENT ADVISORS
For Registered Reps and Investment Advisors, Sequence of Returns Risk is about more than just protecting client income—it’s about preserving AUM. Solving for income needs with an annuity requires less capital than a traditional withdrawal strategy. This frees up assets for you to manage more effectively, delivering better outcomes for your clients and safeguarding your business.
Michael Kitces, CFP, explains it well: “Retirement is about sequence, not averages. The order of returns makes or breaks the plan.”
The webinar on January 21 will help you:
- Articulate Sequence of Returns Risk to clients in a way they understand.
- Position annuities as a complementary tool in retirement portfolios.
- Protect client assets while enhancing your ability to manage AUM.
Register now to gain these insights and more.
WHY YOU CAN’T AFFORD TO WAIT
Sequence of Returns Risk isn’t just a theoretical problem. It’s happening now, and it will continue to affect retirees as markets fluctuate. Your clients need you to address it—before it’s too late.
By attending this webinar, you’ll not only protect your clients but also position yourself as a leader in your field. This isn’t just about avoiding risk; it’s about seizing an opportunity to grow your business and build lasting client relationships.
WHAT YOU’LL LEARN AT THE WEBINAR
DMI’s exclusive webinar isn’t just another industry presentation. It’s a game-changer. Here’s what you can expect:
- Simplified Explanations: Learn how to break down the Sequence of Returns Risk so clients immediately understand the stakes.
- Quantifiable Insights: See the numbers that show how early losses can drain a portfolio and how annuities may help.
- Customizable Marketing Tools: Walk away with client-approved materials that make your conversations more impactful.
- Actionable Strategies: Get proven solutions to protect retirements, protect your AUM, and grow your business.
Whether you’re an insurance agent or investment advisor, this webinar is your chance to elevate your practice.
Don’t let Sequence of Returns Risk undermine your clients’ retirements—or your business. Join us for “Sequence of Returns: Timing is Everything” and gain the knowledge, tools, and confidence to lead the conversation.
- Date: January 21, 2025
- Time: Noon ET
- Register Here
Your clients—and your future success—are counting on you. Don’t miss this opportunity. Sign up today!
Erick Lindewall
VP of Annuity Sales
Erick Lindewall is an industry veteran with 30 years of experience, including over 20 years as an External Variable Annuity Wholesaler. He works with financial advisors in all major distribution channels. Erick has been recognized as a sales and relationship management leader multiple times during his wholesaling career.
Or Call 781-919-2351
Maureen James, FLMI, AIRC, ACS
Owner/Principal at Summit Compliance Group, LLC
“Making regulatory compliance work for you, not against you.”
For more than thirty years, we have been making regulatory compliance a practical part of your business so you can focus on growth. We specialize in making complex insurance and investment regulations understandable and are committed to helping our clients identify and manage their unique compliance risks.
Neither DMI Marketing nor Summit Compliance Group, LLC provide legal advice. You should seek legal advice from your attorney. You are solely responsible for compliance with any federal, state, or local laws and regulations.
