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Why Your Clients Should Understand Finance Needs


The stress people have felt over the last several months is tremendous. This has happened before, but why is this time different? And, how can clients better financially prepare themselves for the future?

Jun 17th 2020
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The past few months living in the COVID-19 pandemic and watching the market's reaction to it remind me of the Mike Tyson quote, “Everyone has a plan ‘till they get punched in the mouth.” 

The stress people have felt over the last several months is tremendous.  We have gone from one of the best economies we have seen, as well as the longest bull market in history, to things coming to a screeching halt and entering the deepest recession since the Great Depression.

This has happened before, but why is this time different?  Why is this recession causing a greater level of stress than we have seen in previous ones?  The fear and concern, I believe, stem from the fact that, this time, we are experiencing a financial event dovetailed with a health event simultaneously.  People, including your clients, are not only afraid about their financial welfare, but their physical well- being too. Compounding this is the fact that they are worried for themselves and family and friends.

This presents you with a great opportunity to reconnect with your clients and deepen your relationship with them. Based on the events that we have seen, one needs to ask themselves how they can position themselves financially to be better insulated from events like this, both now and in the future.  Your clients need to have a plan, not only one that works and they can follow when things are great, but one they can stay with if they experience the proverbial punch to the face.  Most people spend more time planning for their family vacation than they do their financial lives, and this needs to change.

You do not need to put this plan together for your client unless you possess the expertise to do so, but you can introduce them to an advisor that has expertise in this area.  However, if you decide to go about helping your client get a plan in place, you will be looked at as the person who added value by getting them on the right path now. You’ll also be in a position to manage them through the next downturn.

Those who had a plan in place pre-COVID fared better during the recent market volatility because they did not panic. They’ll probably continue to do well going forward.  Over the last several months, many of the conversations we were having with clients were not about the performance of their investments, but the impact on their financial plan.  Yes, clients were concerned about the percentage and dollar declines they saw in their account, but, in the end, they want to make sure they will have the funds they need when they need them to follow through with the plans they have.  In many instances, clients who had a plan in place realized that it remained intact, which is a win for them.

The investors who were most impacted and concerned were those who did not have a plan at all.  They had no way to gauge how the recent events may have impacted their goals or plans for retirement. Without that perspective, it instilled a level of fear that caused them to make poor long-term decisions based upon short-term events. 

When you see the financial impact of a pandemic like COVID-19 combined with the markets declining at a rapid pace, it may prompt you to make a move with your portfolio that could impact your assets for years to come.  At the height of the panic, many decided to make changes to their portfolio, buy more bonds, sell stocks, or even liquidate completely.  Rash decisions, based upon events that came up as quickly as they did, typically do not present an ideal time to make long-term financial decisions.

In some cases, these investors made changes to their investments, and it seemed like the right thing to do. It is really difficult to decipher, in the moment, if this was ultimately the right or wrong move for them because there was no plan to benchmark it against. Not having a plan may have put them in a position where they were taking on more risk than they needed to or expected.  This sharp rise in volatility caused them to re-evaluate and make the necessary changes based upon the current conditions.  Without a plan, these investors take on more of a trading mentality.

Lacking an overall financial plan means you do not have a roadmap for your investments.  This may have caused some to be overly aggressive going into the pandemic and seeing worse declines than those who have an allocation aligned with their plan.  Investing without a plan is like traveling cross-country without a map or GPS.

What’s done is done and we cannot change that, but we can make adjustments to ensure that our clients are not taken by surprise again.  Those who do not have a plan in place should start to explore developing one now.  Investors who have developed a plan but have not looked at it in several years should review it and bring it current.  The markets seem to have settled down a bit, and this will provide you and your clients with some time to begin this process.  The assets your clients have accumulated are simply the dollars that will allow them to bring their goals to fruition.

As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.”  This sums up everything we have discussed in this article.  Tax planning is similar to financial planning.  You would not want your client to wait until the year is over to simply report what they did financially the year before because, at that point, there may be very little you can do.  Ideally, sometime during the year, you would encourage your client to meet with you to discuss their tax plan for the year to make the necessary adjustments to lower their tax liability.  The financial plan works in a similar vein.  You must develop the plan, follow it and be sure to review and update it as things change in your life.  The next time volatility occurs, your clients should feel more in control and be in a position to see if and how their goals and objectives are being impacted by the current events.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

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