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Saturday, Mar 2, 2024

Meet Your Clients on Their Emotional Level

Client Reaction to Pandemic: We have been preparing for this for a long time – through financial planning and investing in alternatives. Our clients were expecting volatility at some point soon because we’ve been advising them to protect themselves, but no one could have imagined a global pandemic would be the catalyst. Surprisingly, our clients asked more about opportunities and how to capitalize on the situation early on. A few weeks in, we saw their focus shift from being opportunistic to having pause. It was interesting to receive more phone calls from clients wanting to be informed and educated around the pandemic and its effects on the economy, rather than questioning their portfolios and wanting to make immediate changes out of fear or uncertainty. Client Questions/Your Reponses: Most of our clients asked: “How is our portfolio going to hold up? How will our private investments perform and withstand?” We encouraged our clients to be patient, not to make any big decisions to their plan because they have been thoughtfully designed to tolerate the appropriate amount of risk. Emotions such as fear and panic are fleeting and temporary, but the financial decisions and changes one makes can be long-term. We mostly reassured our clients that over the short-term, we expect our private investments to do what they are designed to do, and over the long-term, there is a lot more uncertainty given the magnitude of the situation. Memorable Moments: Overall, the gratitude and comfort that our clients have shared being underneath our wings and in the same respect, the gratitude I have felt for being a part of Morton Capital. I am proud of a charitable initiative we launched to fill a big need in our community during the pandemic: financial education and support. Many of my most memorable experiences have come out of this Give Back Initiative where our advisors and financial planners are spending time with families facing huge life changes and struggles. Some families lost both jobs; some business owners are having to fire staff that have been family for years; people are applying for emergency loans; others are trying to decide what bills to pay, how to file for unemployment, and the list goes on. Time spent in this initiative has created memories that will stick with me for a long time. 2020 Economic Disruption Compared to Others: The global impact across all sectors has been unprecedented. The unknowns both medically and financially and the speed with which things were changing was unlike previous disruptions we’ve seen. Although we have experienced the longest economic expansion since World War II, it has been very weak. Interest rates have remained low while debt and deficits continued to grow. We have entered unchartered waters with only speculations on the economic impact. How Your Personality Helps: I have always felt like I was cut from a different cloth as an advisor because I would rather talk heart-to-heart and coach my clients through their emotional worries than focus mainly on statistics and numbers. In a time of heightened emotions, facts, logic and reason don’t usually resonate. It is essential to meet your clients on their emotional level. Changes to Portfolios: Being patient instead of reactive was key during the past few months. Because of the planning we pushed for so long, portfolio shifts have been small and opportunistic. Because of our participation in alternatives (investments beyond stock and bonds), our clients hold lower equity exposure than the average investor. Advice to Clients Now: Nobody knows how or when all of this plays out. We keep reinforcing the fact that all financial decisions are driven by emotions and knowledge. We advise clients to be patient right now until emotions fully settle and the level of uncertainty decreases as more knowledge and information becomes available to us. We believe that investors will be rewarded for staying disciplined and, if patient, better opportunities will present themselves down the line. We have seen significant investment opportunities that were created out of the Great Recession in 2008-2009, and I am confident we will find new investments that didn’t exist prior to this pandemic. Regarding the economy, I don’t think we will get the V-shaped recovery that some are suggesting. The world as we know it has changed and the disruption to businesses’ normal practices coupled with huge increases in unemployment will lead to a slower recovery. There will be businesses that will not be able to recover and sectors that will take a long time.

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