Hedging and Risk Management

Sophisticated Approaches to Help Improve Client Outcomes

Markets are risky, but for clients seeking growth, there may be few successful alternatives—especially when bond rates are low. That's why many RIAs are taking a renewed look at advisory annuities as ways to pursue growth while hedging for a variety of retirement risks.

 

Hedging for Market Risk

Losses that occur near retirement can be especially challenging for retirees who may no longer be able to contribute to their investments to offset those losses.

  • Clients who are more risk averse can pursue potential growth while managing risk with our advisory fixed indexed annuity.
  • Clients who are willing to take on more risk for the potential of more return may want to consider our advisory variable annuity, which invests in the market but transfers some of the risk to Pacific Life due to the unique ability of an insurance company to pool risk when your clients exercise lifetime income options.

 

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Hedging for Interest-Rate Risk

 

When it comes to interest rates, bonds in particular are impacted by trends in any scenario, from low to high or vice versa. Complementing bonds with annuities may make sense for clients. No matter what the environment for bonds and other fixed-rate instruments, you may be able to help hedge interest-rate risk by:

  • Allocating a portion of your clients' money to our advisory fixed indexed annuity, which protects against any market-based losses while offering growth potential linked to the performance of an index.
  • Allocating money to our advisory variable annuity for a portion of clients' portfolios, which allows them to pursue higher potential returns with less concern about the interest-rate environment.

 

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Hedging for Inflation Risk

 

Inflation can critically diminish clients’ purchasing power right when they need it the most. Our advisory annuities can help hedge against inflation, as they:

  • Provide tax-deferred growth potential and access to equity investment options. Investing in equities has historically been a strategic way to grow money and keep pace with inflation.
  • Can be combined with optional benefits (for an additional charge), to ensure the growth of future income. This can potentially balance some of the impacts of inflation—even when markets are underperforming.

 

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Hedging for Tax Risk

 

If your clients are losing money to taxes on annual gains and frequent trading, consider using our advisory annuities as part of a tax-efficient strategy.

  • Ordinary income taxes aren’t due until the time funds are withdrawn, so any money made on gains stays in the annuity and compounds over time.
  • Your clients are free to actively trade and rebalance investment options without the burden of taxes.
  • Tax efficiency is important when your clients leave a legacy. Our advisory annuities can help streamline the transfer of wealth using stretch and trust plans that optimize tax efficiency.
  • The compounding feature of a tax-deferred annuity can help younger investors who have a longer savings timeline.

 

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Hedging for Longevity Risk

 

While it’s great news that people are living longer, it creates the complicated challenge of making sure your clients don’t run out of income. The resources you’ve put in place for them could become exhausted due to market downturns, a low interest-rate environment, illness, or commitment to a long-term care facility. To help hedge for longevity risk, our advisory annuities can provide:

  • A guaranteed source of lifetime income.
  • The advantage of no contribution limits. If a client contributes the maximum amount to a 401(k) and IRA, additional monies can continue to be saved tax-deferred inside advisory annuities.

 

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Add Value with Proactive Risk Management Strategies

 

Managing risk is one of the most important services you provide your clients. Our managing directors are available to help you identify ways to help reduce risk and add value to your clients' portfolios.

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Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney. 

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. 

Under current law, a nonqualified annuity that is owned by an individual is generally entitled to tax deferral. IRAs and qualified plans—such as 401(k)s and 403(b)s—are already tax deferred. Therefore, a deferred annuity should be used only to fund an IRA or qualified plan to benefit from the annuity’s features other than tax deferral. These features include lifetime income, death benefit options, and the ability to transfer among investment options without sales or withdrawal charges.

Insurance products and their guarantees, including optional benefits, annuity payout rates, and any crediting rates, are backed by the financial strength and claims-paying ability of the issuing insurance company, but they do not protect the value of the variable investment options. Look to the strength of the insurance company with regard to such guarantees because these guarantees are not backed by the independent broker/dealers, insurance agencies, or their affiliates from which products are purchased. Neither these entities nor their representatives make any representation or assurance regarding the claims-paying ability of the issuing company.

Pacific Life refers to Pacific Life Insurance Company and its subsidiary Pacific Life & Annuity Company. Insurance products can be issued in all states, except New York, by Pacific Life Insurance Company and in all states by Pacific Life & Annuity Company. Product/material availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues.

Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company and an affiliate of Pacific Life & Annuity Company.

The home office for Pacific Life & Annuity Company is located in Phoenix, Arizona. The home office for Pacific Life Insurance Company is located in Omaha, Nebraska.

For financial professional use only. Not for use with the public.

Pacific Life Insurance Company

Pacific Life & Annuity Company

25-250

MUQ1905-RIA-00

825 E828