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Kelly LaVigne

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As Vice President of Advanced Markets for Allianz Life Insurance Company of North America (Allianz Life®), Kelly LaVigne oversees the Advanced Markets team and is responsible for its strategic direction. This includes providing content and expertise to assist financial professionals in acquiring and serving clients through retirement planning, estate planning, and other tax-related strategies. Prior to joining Allianz Life, LaVigne was director of advanced markets and director of industry and regulatory strategies for Transamerica Capital Management. Before joining Transamerica, he served as vice president of advanced markets for AXA Equitable, where he and his team published a book on retirement income planning to help financial professionals enhance their retirement income practice. LaVigne has also had leadership roles at ING/Aetna Financial Services and Travelers Life and Annuity. LaVigne holds a Juris Doctor (JD) from Western New England College School of Law in West Springfield, MA, and a Bachelor of Science degree in communications and marketing from Central Connecticut State University in New Britain. He holds FINRA 6 and 26 securities registrations, a Life and Health Insurance license, and is a Certified National Instructor for Life Insurance Continuing Education. LaVigne can be contacted at Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416. Telephone: 763-765-6614. Email: Kelly.Lavigne@allianzlife.com.

Are We Seeing The Light At The End Of The COVID-19 Tunnel?

Most Americans report seeing brighter days ahead as financial impacts of COVID-19 begin to fade. As the stock market continues to hit record highs and COVID-19 case numbers continue to decline, most believe it’s safe to say brighter days are ahead when it comes to our finances. According to a new study* Americans are feeling better about risks from market conditions than they have in over a year.

Less than half (48 percent) of Americans say they are worried about a major recession, a number that has been steadily declining recently, and is down from 65 percent this time last year when the major financial impacts of the COVID-19 pandemic were just beginning to show themselves. At the same time, only a third (33 percent) say they are worried about the risks that market volatility can have on their retirement portfolio.

Specific to how COVID-19 impacted the financial situation of so many Americans, many report feeling more optimistic, with 63 percent saying they are less worried about the pandemic’s impact on their finances compared to this time last year. But many still haven’t forgotten the drastic and far-reaching impacts of the pandemic, with 50 percent saying they are still worried about another pandemic or a new strain of COVID and its impact on their portfolios.

But for many, the worries about market swings never really go away, as nearly three quarters (72 percent) say they expect the markets to be very volatile in 2021, and over a third (34 percent) say they are too nervous to invest right now. Those who say they are too nervous cite volatility (56 percent), fear of a market crash (53 percent), and lack of knowledge/information (53 percent) as their top reasons for holding back.

If the COVID-19 pandemic taught us anything about finances, it’s that these black swan events do happen, and the risks from market volatility can pose a real threat to investments and retirement security.

Naturally, we always find something else to worry about. When asked about issues that may have a negative impact on their portfolios over the next six months, 58 percent say they are worried about rising interest rates, and 57 percent say they are worried about tax policy.

Taking a breather
For clients who fall in the “perpetual worrier” category, now is a good time to talk with them about assessing various risks to their portfolios while we have a little bit of breathing room. The study found this topic is on the mind of Americans as well, with 63 percent of respondents saying the effects of COVID-19 on the economy are making them think about how to better protect retirement savings from market volatility.

The good news is that nearly two-thirds (64 percent) say they have made positive changes to their saving and spending habits since the pandemic began. It’s wise to take advantage of this momentum and work with your clients to make these changes into long-term habits that can help reduce risk and set them up for success in the future.

Beyond some of the behavioral changes that people are making, some are looking toward products that provide a level of protection against market drops as a potential solution. Currently, 64 percent say it is important to have some retirement savings in a financial product that provide some protection from market risk. That number is even higher for those with investable assets of more than $200,000, at 78 percent.

To help clients take advantage of momentum in the markets, you can work with them to identify options for growth, but still offer a level of protection. To that end, 47 percent say they are willing to give up potential gains for a financial product that protects a portion of their retirement savings, up from 43 percent at the end of last year.

While markets are hot, it can be a good time to remind clients that the principle behind successful investing of “buy low, sell high” seems so basic, but it can often be difficult to do in reality. Emotion and herd mentality often play critical roles in scrambling investor behavior, resulting in “buy high, sell low.” Chasing after returns like investing in a “hot segment” of the market and then panicking when the investment is being sold off can mean that individuals will never match the returns seen in the market.

This behavior is so incongruent with retirement accounts that are meant as long-term investments. By striking a balance with an option that will help mitigate losses but can also limit gains may help prevent a client from hitting the panic button and help to stabilize performance over the long term.

At the same time, it’s important for clients–even those that were burned by market drops in the past–to not sit on the sidelines with their cash. In fact, this sentiment of wanting to take action showed up in the survey results as well, with the number of people saying it is a good time to invest in the market steadily increasing since the end of last year, currently at 38 percent.

Looking ahead to brighter days
While we can’t forget the devastating financial, health and economic impacts of the COVID-19 pandemic, we can all start to take a more optimistic outlook. It’s important, too, to look for the silver lining, take advantage of lessons learned and apply them going forward.

Taking the time now can help mitigate future risks to retirement security, and even help with day-to-day finances and planning. The good thing is this is true–even for the worriers among us.

*Allianz Life conducted an online survey, the 2021 Q2 Allianz Life Quarterly Market Perceptions Study, in May 2021 with a nationally representative sample of 1,005 respondents age 18+.

Allianz Life conducted an online survey, the 2020 Q2 Allianz Life Quarterly Market Perceptions Study, in August 2020 with a nationally representative sample of 1,005 respondents age 18+.

What Happens When A Client Has An Unexpected, Early Retirement?

Helping clients prepare for retirement requires careful planning over many years. But what happens when that long-term approach is cut short by an early, unexpected retirement?

While many assume that may be unlikely to happen, think again. According to a recent study,* a surprising 50 percent of Americans say they retired earlier than expected, with the vast majority doing so for reasons outside of their control, including 34 percent who said they experienced unanticipated job loss and 25 percent who were dealing with health care issues.

This problem is likely to become exacerbated in today’s environment with a combination of the COVID-19 pandemic and widespread economic strain. Baby boomers who may have had retirement on the horizon are now faced with retiring sooner than they had planned. And that is where it begins to get complicated.

In these cases, clients are starting retirement before they are truly “ready,” and they are faced with spending more time (in some cases a lot more time) in retirement than their original financial strategy had accounted for.

So how can financial professionals help with the transition, and ease any worries clients may have about their finances as they reach retirement before they anticipated?

Planning for the unexpected
It all starts with making a plan for income in retirement that is flexible enough to adapt when a client’s life scenario changes. People heading into unexpected retirement are dealing not only with big changes to their day-to-day lives, but also with the loss of a regular paycheck they depend on. They are switching from saving money to spending money. It can be a jarring shift from both a behavioral and psychological standpoint. Developing a retirement income plan as early as possible is critical as it can help clients understand where their money is going to come from, in turn, helping provide a greater sense of control—and even some normalcy.

In these situations, having a financial product that can provide guaranteed income in retirement can be an important part of this strategy. It can also help relieve fears about running out of money in retirement, since over half (56 percent) of people say running out of money before they die is one of their biggest worries.

Yet, this is not as simple as it appears. For most people, incorporating financial products that offer guaranteed retirement income isn’t top of mind as a potential solution. The study found that only three in 10 not-yet retired people say they currently have a source of guaranteed income in their portfolio to help them meet retirement goals. While nearly four in 10 (39 percent) say they plan to purchase a guaranteed income product in the future, only three percent view it as a top priority.

Occasionally just the mentioning of the word “annuity” will be met with resistance. But guaranteed income products like annuities can help solve many of the financial issues that an unexpected retirement can present. Not only do they provide guaranteed lifetime income that can help address gaps due to no longer receiving a steady paycheck, but they can also provide a level of protection against market downturns for people starting an early retirement in a volatile market environment like the one we are in now and which may continue for some time.

Making a savings plan
For those who may be further out from retirement, like Gen X clients, boosting retirement savings should remain a priority. But 42 percent of those within 10 years of retirement say they are currently unable to put away any money for retirement and almost one-third (32 percent) say they are way too far behind on retirement goals to be able to catch up in time. Given the current environment, this may not be a surprise, but undersaving will significantly harm a retirement plan—especially if they may have to retire early.

The good news is it’s not too late. Helping these clients build a savings plan, and even starting to create a flexible retirement income plan early, can help alleviate risks down the road if a client happens to have an earlier-than-expected retirement. And recent events should also serve as a reminder to younger clients that these types of events do happen, and now is the best time to prepare for and develop a strategy to help address these risks.

Taking the next step
We all envision retirement to be a carefree time, but when clients have to start retirement early for unfortunate reasons like job loss or health issues, it can put a grey cloud over the start of their golden years.

No matter what life phase clients are in, creating a strategy for taking income in retirement can help. Knowing that they have a stable, dependable, and reliable income stream can help them build confidence to manage any risks that come their way, no matter when they have to put their plan into action.

Annuity guarantees are backed by the issuing company

*Allianz Life conducted an online survey, the 2020 Retirement Risk Readiness Study, in January, 2020, with a nationally representative sample of 1,000 individuals age 25+ in the contiguous USA with an annual household income of $50k+ (single) / $75k+ (married/partnered) or investable assets of $150k.

ESG Investing—Much More Than A Millennial Story

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It’s possible you’ve already had some clients ask about adding an ESG component to their portfolio, and odds are they were on the younger side of your client base. This makes sense as nearly two-thirds (64 percent) of millennials in the study said ESG issues are important in their investing decisions. Not forgetting that having access to the best Trading Apps im Vergleich (trading apps in comparison) can help them to make the most well-informed decisions when it comes to making the best investment for their portfolio. If they don’t have that, the process could become a lot harder. The study also found that millennials are more likely to be interested in learning about various types of ESG information and are more likely to take action based on issues that are important to them.

But if you think ESG investing is purely a millennial story, think again, there is more than millennial money that meets the eye when it comes to investments.

Interest across generations
Although the study found that millennials are more likely to make investment and purchasing decisions based on ESG topics, Gen Xers and baby boomers are also putting their values into action-and this is a trend that is only going to grow.

More than half (54 percent) of Gen Xers said ESG issues are important in their investing decisions with boomers not far behind at 42 percent. In addition, majorities across all generations say ESG is a key factor in which companies they choose to do business with (77 percent of millennials/64 percent of Gen Xers/61 percent of boomers).

Furthermore, baby boomers are actually more likely than millennials and Gen Xers to say that the reason they want to participate in ESG investing is to encourage companies to be good corporate citizens (61 percent of boomers, compared with 51 percent of millennials and 48 percent of Gen Xers). Baby boomers are also more likely than other generations to take their business elsewhere if they disagree with a company’s track record related to certain ESG issues including transparency in business practices and finances, levels of executive compensation, and charitable contributions.

Lack of action equals opportunity
It’s clear that people from all generations-not just millennials-are looking to learn more about ESG and want to put their values into action. But actual participation in ESG investing is still quite low. Only 17 percent of millennials are currently participating in ESG investing, with percentages much lower for both Gen Xers (seven percent) and boomers (three percent).

What could be causing this lack of ESG activity? Part of it is undoubtedly a lack of education and resources as survey respondents noted they need more information in order to feel comfortable making ESG investment decisions. Yet, an equally important factor to consider is the lack of guidance people are currently receiving about ESG investment opportunities.

The study showed that clients simply aren’t hearing enough about ESG options from their financial professionals. In fact, most financial professionals have yet to take a proactive approach helping clients learn about and participate in ESG investing.

Only 30 percent of Americans working with a financial professional say they have discussed ESG investing with their advisor, and most of the time it was the client who initiated the conversation (69 percent). This, despite the fact that three-quarters of respondents currently working with a financial professional said they have positive perceptions of ESG investing, and over half (51 percent) of those currently not involved with ESG investing are interested in it.

3 steps you can take today
So, how can you put this knowledge to good use and strengthen relationships with you clients? Here are three things you can do today to make ESG a bigger part of your practice:

  1. Do the research-As ESG investing is becoming more common, resources to better understand ESG investment opportunities are more readily available. A couple of good options that can help build your ESG knowledge include the United Nations Sustainable Development Goals and the Principles for Responsible Investment. Keep in mind that it’s also becoming easier to learn about companies’ business practices across the ESG spectrum- something more and more clients are coming to expect of their financial professionals. Take the time to understand the full picture before making any recommendations.
  2. Be proactive-Don’t wait for your clients to bring up ESG-let them know that you’re informed and able to provide sound advice about ESG options that could benefit their portfolio, especially when it comes to saving for retirement-after all, the majority of people already believe that companies that are good corporate citizens are better positioned for long-term success. It’s important to proactively work with clients to identify what issues are important to them and help them build their portfolio in a way that reflects their values.
  3. Be inclusive-One of the biggest takeaways from the ESG Investor Sentiment Study is the fact that-contrary to popular belief-all generations are interested in learning more about ESG investment options. Although millennials are a clear target for ESG discussions, don’t leave your Gen X or boomer clients out of the conversation. It’s likely they have opinions on ESG and would appreciate the opportunity to discuss and determine if some involvement with ESG investing might be right for their larger financial strategy.

Becoming more knowledgeable about a company’s operations, including its ethical impact and sustainability practices, can help your clients make better-informed spending and investing decisions. By taking the time to learn more about ESG investing, you can differentiate yourself and engage you clients in a new and meaningful way.

*Allianz Life Insurance Company of North America conducted an online survey, the Allianz Life ESG Investor Sentiment Study, in December, 2018, with a nationally representative sample of 1,000 respondents ages 18 years or older.

Helping Baby Boomer Clients Deal With The Realities Of RMDs

As over 58 million baby boomers reach 70 ½ over the next two decades, they must deal with the realities of required minimum distributions (RMDs). Boomers are just starting to deal with RMDs and the potential tax repercussions in earnest, with the first baby boomers turning 70 ½ in 2016. As a result of the massive number of people being required to draw down their retirement assets, up to $10 trillion will be subject to these mandatory withdrawals over the next 20 years according to a report by BNY Mellon.1

While RMDs are a necessity, that doesn’t mean people have to like them. According to a recent study,2 a majority of high net worth people have a negative opinion about them, with 83 percent saying they hate paying taxes on their RMDs that come out of most tax-deferred retirement plans.

Beyond thinking through the strategy for actually withdrawing assets (it can be a manual process), financial professionals should work with baby boomer clients to create a plan for using their RMDs, and help them figure out how to take the money in a tax-efficient way.

Making a Plan
As people enter retirement and approach age 70 ½, they may know that they have to take RMDs, but feel unsure of what exactly to do with the proceeds. Do they just put those funds into a savings account? Use the money as part of their income in retirement? Reinvest it? Donate money to charity?

Over a third of people in the study (35 percent) say they wish they had a better plan for using their RMDs, but overall a majority (79 percent) agree that they want to use their RMDs in a way that allows their portfolio to grow. That means they might not be satisfied just taking the money and dropping it into their checking or low-interest savings accounts.

Before you help them develop a strategy for how they should use their RMDs, work with clients to determine what their upcoming financial goals may be. Do they want to take a big trip? Reserve funds for future healthcare costs? Leave a legacy?

Whether or not clients need the money plays no role. They must take the distributions regardless, and financial professionals should help them find a way to use the withdrawals in a way that works for the client’s goals and meets their desire for potential growth.

Understanding the Tax Impact
There’s no shortage of tax questions around RMDs, and nearly a third (32 percent) say they have difficulty understanding how RMDs could impact their overall tax obligation. This presents an opportunity for financial professionals to not only educate their clients on RMDs, but to talk through what can happen to their tax bill come next April—including being bumped into a higher tax bracket.

While 67 percent of consumers say they have a good plan to minimize the impact of taxes on their retirement income overall, that still leaves one-third who do not have a strategy in place.

Since paying taxes on RMDs is a big pain point, explore opportunities that can help make up for lost funds. In fact, 71 percent of respondents said they would be interested in using RMD payments to fund a financial product that offsets the impact of taxes.

Also, in order to avoid the hefty 50 percent excise tax that is triggered if a client fails to take their RMD by the year-end deadline, explore some of the ways they can automate the withdrawals so they don’t have to worry about missing a deadline and paying a penalty.

Facing the Realities of RMDs
As the number of baby boomers turning 70 increases over the next few years, they will have to face the realities of RMDs—which can include being forced to take money they didn’t need or want and then the double whammy of having to pay taxes on it.

The role of the financial professional in helping clients navigate RMDs can’t be understated and will be of increasing importance in the coming decades as nearly 58 million baby boomers will be required to take RMDs in the next 20 years.

Start to think through your own process of helping them plan for RMDs, and by anticipating their pain points and needs you can help them create a strategy for taking RMDs that helps meet their goals and addresses their taxes efficiently.

This article is for general educational purposes only. It is not, however, intended to provide fiduciary, tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America, its affiliated companies, and their representatives and employees do not give legal or tax advice. Encourage your clients to consult their tax advisor or attorney for their specific situation.

References:
1. https://www.bnymellon.com/us/en/what-we-do/business-insights/impending-convergence-of-baby-boomers-and-rmds.jsp.
2. RMD Options Study* by Allianz Life.
https://www.allianzlife.com/about/news-and-events/news-releases/Avoiding-Tax-Time-Surprises.

*Allianz Life Insurance Company of North America conducted an online survey. The RMD Options Study was conducted in February/March 2018, and included a nationally representative sample of 805 respondents ages 65-75 with retirement savings of $500,000 if single or $750,000 if married and who are the primary decision maker or share equally in decision making.