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San Fernando
Monday, Jan 30, 2023
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Slowdowns Are Not Typically Self-Induced

Client Reaction to Pandemic: Most of my clients took a defensive posture going into the end of 2019 and early 2020. I recommended this based on the premise that the economy was nearing the end of a 10-year bull market and I felt that it would likely slow down going into 2020. You can’t plan or predict a black swan event like this pandemic. That said, the more defensive position has helped our clients withstand the unprecedented volatility. Communication with clients has increased quite a bit. I regularly talk with clients on a quarterly basis and we are now communicating monthly at a minimum. Client Questions/Your Reponses: Generally, clients want to know, “Are we going to be OK financially?” I can answer their question by updating their custom cash flow analysis. What this means is looking at their financial goals, and then using our technology to compute what their financial situation will look like if various positive and negative potential scenarios happen. Doing this allows us to show clients their likelihood for success in reaching their most important financial goals. There are no guarantees, of course, but walking clients through this process gives them peace of mind that they’re still on track. Memorable Moments: One client in particular is memorable. My conversation was with the patriarch of a family. He is an entertainment executive that works in a very demanding position. He also suffers from a lifetime of asthma, which puts him as a high-risk person during this pandemic. What struck me during this time of chaos was his humility. During our last discussion, he reminded himself of how lucky he and his family are to be healthy and in a good position financially. Our conversation was not about the short-term volatility and panic selling in the markets. He was more concerned about how others were going to survive that were not as fortunate. We spent the majority of our conversation discussing food banks, blood banks and other charities that his family could support to help others. Changes to Portfolios: As I mentioned, many clients took a more defensive position going into the end of 2019. We rebalanced these defensive portfolios during the recent dips and often added more to equities. Now we are in the process of reiterating their long-term allocation and making sure that each client’s investments are aligned with their unique long-term goals. 2020 Economic Disruption Compared to Others: This is unique because slowdowns are not typically self-induced. We purposely shut down the economy, which prompted former Fed Chairman Ben Bernanke to compare the shutdown to a “very bad snowstorm.” What is also unique is the speed at which the Federal Reserve has stepped in with massive stability and stimulus, with the intention of sustaining individuals, small businesses and key industries. Advice to Clients Now: Stay healthy and safe. Next, I’m telling them to make sure they have enough liquidity to sustain themselves over an extended period of time. Many have asked if and how the markets will recover. While no one knows for sure, a common scenario that’s possible is that the recovery may look like the Nike “Swoosh” – where the markets goes down quickly and takes an extended time to recover. No matter what the recovery looks like, what’s important is to know that we will likely see more volatile days ahead, and full recovery may be unlikely until the health crisis is over. Financial Management Business: One trend we’re seeing in our practice is the importance of planning out your legacy – meaning how you want to allocate your assets in retirement and after your death. A big focus in our practice is helping clients think creatively about how to pass down and communicate their money values as well as the assets themselves. Biggest Trends in Financial Management: Wealth management has always been about having personal relationships over time. Social distancing has changed that considerably, because we are not able to meet face-to-face. We have switched to having virtual and phone meetings with clients during this pandemic. Some clients prefer the convenience of connecting online, so I expect we will continue to offer virtual meetings. That said, we know many clients will be happy when it’s safe to meet in person again.

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