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 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

 

Many investment advisor representatives are turning from bonds to annuities in the wake of the ongoing low interest-rate environment. Low interest rates also create high turnover in the bond market, which causes significant tax inefficiencies that negatively impact a portfolio. Help hedge for interest-rate risk by:

  • Allocating a portion of your clients’ money to our advisory fixed indexed annuity to lock in a minimum guaranteed interest rate or select an interest-linked option with the potential for further growth based on the performance of the index.
  • Allocating money to our advisory variable annuity to free clients from interest-rate dependent products in a portion of their portfolio to pursue higher returns.

 

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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 one of the best ways 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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All guarantees are subject to the claims-paying ability and financial strength of the issuing insurance company and do not protect the value of the variable investment options, which are subject to market risk.

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. 

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Annuity products are not FDIC insured, may lose value, and are not guaranteed by any bank.

Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA) and an affiliate of Pacific Life & Annuity Company. Variable and fixed annuity products are available through licensed third parties. 

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

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