Amid the economic fallout from Covid-19, Aamina Zafar hears from a group of advisers about how they are reassuring and supporting their clients
Financial advisers must embody the famous wartime message of ‘keep calm and carry on’ to ensure their clients remain financially resilient amid the continued economic fallout of a second wave of coronavirus.
Mark Ireland is one of a growing band of IFAs who believe keeping clients well informed and reassured is more important than changing their investment strategy as the reality of a further lockdown hits the UK.
Commenting on his approach for 2021, the Chartered financial adviser at Hitchin-based Lyndhurst Financial Management, says: “I am not changing much of the strategy. I am old enough to have been around the block a bit, to have guided my clients through the tail end of Black Monday, the dotcom crash and the global financial crisis. So recent events, albeit unprecedented in cause, have presented the same worries, the exact same anxiety as in each of the previous crashes, leading to questions of: Is my money safe? Should I get out? What should I do now? So, having reminded my clients that we’re on a journey, that we’ve developed a plan, one that is somewhat resilient and to some degree shielded from the headline losses shouted out by the media, we can reassess, collect our thoughts and press the reset button, bringing us back to the plan and the objectives and goals within it.”
However, he insists this does not mean that IFAs should sit back and relax. Instead, Mr Ireland suggests they must revisit fact-finding questions to re-confirm their clients’ tolerance to risk, ability to absorb short-term losses within their plan and their current level of protection.
Mr Ireland says: “Looking beyond the horizon, to a world of continuing high levels of market volatility, my role is to help my client reappraise their plan. Are their goals altered by recent events? Are they changing their focus, maybe looking differently at retirement ages or the help that they wish to give their families? As ever, it starts again with the plan.
“I have met many advisers through the years who are order-takers, responding to the request from the client to sell them something rather than building relationships and giving guidance.
“So, I will be revisiting the questions I have asked before, to get the client to again tell me what they are working toward, where they want to be financially in the future. If this has altered, then I will develop the plan to accommodate, obtaining their agreement and ownership of the actions being taken.”
A similar sentiment is expressed by IFA Gemma Siddle, who believes in a two-pronged approach for her clients in the new Covid-19 era. The first is to ‘hold steady’ to achieve long-term financial goals; and the second is to reassess each client’s level of life, illness and unemployment cover.
The Chartered financial planner at Newton Aycliffe-based Eldon Financial Planning, says: “For those with investments, market volatility is part of investment and the work financial planners do in assessing risk profile and ensuring capacity for loss comes into its own in volatile conditions. It allows planners to say ‘hold steady’, ‘you can afford to wait this out’ and prevent both the circumstantial and psychological need to cash in at what could be a very bad time.”
Ms Siddle also suggests a major factor that is allowing clients to remain financially robust during the coronavirus pandemic is the continuous increase in online financial planning services.
She adds: “I have been truly impressed with how our profession has embraced technology to keep providing ongoing services to clients at a time they really need it. This dedication is vital in building trust in our profession and it has been amazing to see so many companies determined to step up to the mark and continue with ‘business as usual’ for our clients, so that we are there when they need us most.”
The next year reminds me of something my driving instructor used to say: you are most likely to get into an accident at a junction, when the flow of traffic changes and people change direction
This positive outlook is in sharp contrast to the sad reality that many households are struggling to withstand income shocks – especially with the end of the UK government’s furlough scheme in sight, and the steady rise in job losses.
In fact, the most recent unemployment rate – for June to August – was 4.5%, according to the Office for National Statistics (ONS). That is an increase of 0.4% from the previous three months and meant that 1.5 million people were unemployed.
Between March, when the first lockdown began, and September, the number of people claiming benefits rose 120% to 2.7 million.
With rules differing between England, Scotland, Wales and Northern Ireland, Keith Churchouse believes it is vital that advisers prepare for continued disturbance with better remote access to service.
The director and Chartered financial planner at Guildford-based Chapters Financial, says: “We have prudently and safely prepared since the first lockdown to be ready for any second event, updating and increasing mobile technology and honing our online and virtual meeting skills as our clients also improve their online connectivity. In this regard, the world for our clients has changed, although there is no change in the fact that they still want to hear from you as their financial planner. Our website blog has also posted more articles during the period, for visitors to know that we remain confident and active.
“The natural life junctions that we continue to see for our clients remain unchanged and we believe that in some cases their reliance on us as advisers has increased. The adaptation of the way we deliver our skills has in many cases changed to a virtual proposition and this will be the case second time around. The trust placed in us by our clients remains unchanged and this still remains the most vital element of any client relationship.
“Perhaps the biggest fear is of fear itself. Looking into the unknown is always a challenging proposition. However, our profession is about the life challenges that our clients face as we share their journey and, in that regard, we are well prepared with nothing to fear.”
Expect the unexpected
So, what does this prolonged economic turbulence mean for financial planners next year? According to Daniel Elkington, it requires IFAs to expect the unexpected. That is why he is currently stress testing all of his clients’ financial plans against a certain level of loss next year, relevant to their attitude to risk, and then assuming the worst-case scenario of four more years of stagflation, where there is zero asset growth and 5% inflation.
The Chartered financial planner at Lincolnshire-based MT Financial Management, a trading unit of Fairstone Financial Management, says: “The role of the financial planner to identify risks and put plans in place to mitigate against these risks. This year has demonstrated what it means to expect the unexpected.
“For some people, the effect of the pandemic may have had an impact on their retirement plans, particularly if they were looking to retire in the next year or two. Employment uncertainty in combination with volatility in the financial markets is understandably concerning to some people approaching retirement age.
It would be naive to say that these issues will not have an impact on people’s ability to retire.
“Any dramatic changes to an investment stance in the current environment is likely to be costly and it may make sense to consider retiring more gradually than planned or to await greater market stability. A financial review to assess all options is essential before changing any plans.
“The next year reminds me of something my driving instructor used to say: you are most likely to get into an accident at a junction, when the flow of traffic changes and people change direction. Imagine approaching one of those huge roundabouts that link six trunk roads together and the lights have gone down. The overriding principle is to hope to go, but be prepared to stop. Take an opportunity if absolutely certain, but it’s better to pass on an opportunity than meet with a disaster.
Aamina Zafar is a freelance journalist