Approaching Investments in the Current Market

Taking time to provide individualized assistance to all clients will make you a strong defender against the storm.

By Brad J. Myers

States are beginning to roll back their COVID-19 restrictions, and stock markets have started to recover from their post-crash lows.

But economic storm clouds continue to gather, and there is no quick end in sight to the pandemic. In this unique historical period, we must go above and beyond to offer clients as much information and empowerment as they need to make the best investment decisions for their individual financial situations.

Overcommunication Is Key

While most advisors scrambled to reach out to clients at the start of the coronavirus crisis, some may be returning to a more typical cadence of more reactive communications. This reversion is premature, as we do not know how strong a second COVID-19 wave might be and what economic consequences it might have.

Overcommunication remains the order of the day — clients should still receive continual reassurance that we are here for them, and that their long-term financial game plans remain on solid footing.

Increased communication with clients will help you keep a pulse on their investment outlooks and ensure they have the information they need. As during prior recessions, some clients will want to acquire large amounts of commodities like gold or Bitcoin. Others will want to invest more than usual in stocks, convinced the market lows have passed, while some will want to refrain from investing altogether.

Advisors must check in with all clients to ensure their actions line up with long-term goals. More than usual, advisors should provide additional information to help facilitate informed choices. At the end of the day though, clients’ wishes must receive proper deference.

As the economic impact of COVID-19 continues to unfold, frequent check-ins will help rein in clients’ fear reactions and subsequent impulsive decision-making. Dividend cuts, bankruptcies and sector-specific challenges will continue into next year, and future expectations may need continual refinement. Other events, including the 2020 presidential election, will surely spark anxiety, and proactive education on what these events could mean for clients’ portfolios can help.

Helping Clients Young And Old

Good financial plans are designed to withstand crises like this one, regardless of an individual’s situation, but older and younger clients may still need more specialized assistance.

COVID-19 may have forced some older individuals into an earlier retirement than they expected, so their financial plans will need adjustment. Others still approaching retirement may need to be taught why they should move their portfolio funds into safer assets, even though safer assets have less growth potential. Ideally, retirement is never a surprise, but investment strategy shifted years in advance can protect those who find themselves in that scenario.

Market lows allow younger investors to open portfolios at reduced cost with high potential rewards, especially if they haven’t invested before. The story changes for those who will need funds to buy a house or car in the next year or two — they need to secure their money, and the markets may continue to swing as society sorts through COVID-19 and its aftermath.

Any clients with high interest debt, such as credit card debt, or without emergency funds should focus on paying debt or saving before they put extra income into investing. Unfortunately, COVID-19 has demonstrated why everyone should have cash reserves on hand: there is no guarantee the markets will save them in an emergency.

Economic uncertainty is here to stay for a while, and advisors are poised to provide the reassurance clients need for their long-term plans and short-term choices as long as it lasts. Taking time to provide individualized assistance to all clients will make you a strong defender against the storm.

Younger clients who have a high risk tolerance, longterm horizons and no high-interest debt might benefit from investing right now.

Brad J. Myers is a founding partner at Granite Canyon Wealth Management and an 18-year member of MDRT. He is a current trustee of the MDRT Foundation and spoke at the 2019 MDRT Global Conference on financial planning. He lives in South Jordan, Utah.