The following article was reproduced in part from "November is coming," published in our Quarterly Investor's Magazine – Q4 2020, a quarterly print publication produced by People's United Advisors.
This quarter, we sat down with our four Regional Wealth Leaders to discuss what they’re seeing in their respective regions, and how the pandemic has changed planning.
What is the single biggest issue you think the pandemic has taught us about planning?
Scott Carpenter: I think the biggest issue that the pandemic has taught us about financial planning is that it’s not a one-and-done exercise: it’s a dynamic process. We often see clients doing a good job initially of putting their financial houses in order but stopping at that point. The pandemic reminded us that situations and lifestyles can change suddenly, which illustrates the need to revisit your plan regularly with your advisor and to make updates along the way as needed.
A financial plan is a roadmap to your financial future, and as things happen along the way, you need to adjust—to mitigate risk, take advantage of opportunities, and keep your strategies aligned with your objectives.
David J. Dixon: I think that the pandemic has shown us how important it is to take a long-term perspective on both planning and investment management. So much was happening so quickly this past spring that remaining focused on the long-term wasn’t easy: it’s always difficult to stay grounded when the markets are in crisis mode. One of the reasons we encourage clients to have sufficient liquidity is so they can afford to have that full perspective.
Anne Donahue: For me, it’s that everyone needs an emergency fund. Although most advisors always recommended having three to six months of savings in a liquid account, the pandemic has demonstrated the importance of maintaining that nest egg. Overnight, clients who had very stable careers found themselves suddenly out of work. Besides the need for cash to pay the rent or the mortgage, some of those clients now faced the task of paying for their own health insurance. Volatile markets make pulling money out of stocks at the wrong time very challenging.
In fact, the question for today is, is six months of emergency cash enough?
David Murphy: The pandemic has taught us to always have a plan in place before a market or a personal problem occurs. You can always adjust to the nuances of the situation, but it’s very hard if you have to start planning from scratch when you’re facing a difficult issue.
What are some of the primary client concerns that you’re hearing about in your region?
Scott Carpenter: The most widespread concern I’m hearing recently from clients centers on health and family. Clients freely admit that their health and family time had taken a back seat to keeping up with their hectic work and life styles. With more time at home now, clients are paying more attention to planning issues like revisiting their estate strategies, advance directives, life insurance, liquidity, and savings and investments.
These topics don’t stand out as fun stuff for most people, but their importance became much clearer with the daily deluge of pandemic risks and death tolls.
David J. Dixon: Many of our clients are concerned about the perceived disconnect between what they hear on the TV about the pandemic and the economy on the one hand, and the rising stock market on the other hand. As I mentioned before, we encourage our clients to take a longer-term perspective and not make major changes to their plans or portfolio allocations along with the shifting vagaries of the daily news.
A big part of our job as advisors is to offer peace of mind by providing an objective, professional perspective based on years of experience. Some of our clients who have been with us a long time tell us, “We knew you were going to say that. We just wanted to hear you say it.” We like it when that happens.
Anne Donahue: Many of our clients are looking for an answer on how to balance risk and return during this protracted period of low interest rates. Finding the best solutions for cash and fixed-income allocations in a low-rate environment has been a common issue. The search for return has, in some cases, impelled clients to take on more risk in their investment choices, but only if they’re comfortable with it.
David Murphy: Wealth preservation, risk management, and educating their children about money and inheritance are what stick out in my mind. Many clients have accumulated sizable wealth through hard work and a lifetime of prudently managing their expenses. They navigated the market downdrafts of 1987, 1990 (the savings-and-loan crisis), 2000 through 2002 (the implosion of the tech bubble), and 2007-2008 (the global credit crisis).
Now they’re asking for our assistance in dealing with the volatile COVID-19 market—and with planning issues generally. They want our teams to help their children avoid the common investment pitfalls, but they also want us to help craft clear planning documents with their attorneys and other professionals: COVID-19 has brought those issues to the fore.