Advisers Turn to Market Protection Strategies Amid Investor Anxiety

Wednesday’s Federal Reserve Federal Open Market Committee decision to hold interest rates steady and that morning’s decline in the Dow Jones Industrial Average that reached an intraday low of -1.78% are among the latest examples of market volatility.

If such events are not evidence enough to confirm the anxiety of investors, 77% of nonretired investors surveyed by the Nationwide Retirement Institute in the first quarter of the year said they were concerned about a U.S. economic recession in 2027.

Investors and advisers are not straying away from addressing this stress: 60% of advisers say the events of the last 12 months have made them more likely to recommend a guaranteed income solution as part of a client’s portfolio.

“Investment markets reached all-time highs this summer in the face of elevated volatility, reflecting a shift in how investors are interpreting uncertainty,” said Marck Hackett, chief market strategist for Nationwide’s Investment Management Group, in a statement. “We’re seeing them use these periods of volatility to rebalance, diversify and position themselves for future growth.”

Nationwide found that responding advisers’ use of registered index-linked annuities as a market risk protection strategy grew to 52% this year, up from 39% in 2023.

The rising use of guaranteed income was also highlighted in this year’s DC Plan Benchmarking Survey conducted by PLANADVISER’s sister publication, PLANSPONSOR. Among surveyed 401(k) plans, 6.4% offered in-plan retirement income products, up from 4% in 2024. It was offered in about one-quarter of 401(k) plans, up from 21% in 2024, and in 46.7% of 457 plans, up from 20% in 2024.

Interest in such products has not come solely from advisers. Nationwide found that 57% of responding nonretired investors were willing to dedicate a part of their portfolio to an annuity or to another guaranteed income product.

“Through asset allocation, diversification and the use of solutions like annuities that incorporate downside protection, advisors can help clients stay invested during periods of volatility while managing the emotional and financial risks that sometimes lead to hasty decisions,” said Brad Carrier, Nationwide’s vice president of annuity distribution, in a statement.

According to the survey, 29% of responding nonretired investors said they did not have a strategy in place to protect their assets against market risk, and another 10% said they were not sure whether they had a strategy.

Similarly, a survey by retirement planning platform Boldin of its users found that respondents’ top retirement concerns included running out of healthy years to enjoy retirement (51%), running out of money (8%) and worrying equally about both outcomes (36%).

“Retirement planning has long focused on making sure the money lasts,” said Steve Chen, Boldin’s CEO and founder, in a statement. “People are just as focused on making sure they [are] healthy enough to actually use it. Most say they’d travel more right now if they trusted the number in front of them.”

Other findings from Boldin’s survey included that 67% of respondents named travel as a top retirement goal, more than prioritized spending time with family (51%) and dedicating time to hobbies (43%).

Advisers surveyed by Nationwide also said they were monitoring several threats to clients’ long-term retirement plans.

Twenty-four percent said the cost of healthcare was among the most immediate challenges to their clients’ retirement portfolios. More than half (55%) of advisers said they believed Social Security or Medicare funding would be reduced, with 40% specifically citing Social Security solvency as a concern. Additionally, 58% of responding advisers expected the future tax burden for clients to increase.

Nationwide’s online survey of 528 advisers and financial professionals and 2,012 adults with investable assets of more than $10,000 was conducted by the Harris Poll from January 15 through February 6. . Boldin surveyed 1,331 members of its retirement planning platform in July.