Mitch Moylan is a business development representative at Advicent, the financial planning technology provider of choice for nearly 100,000 financial professionals.
Speaking at the Economic Club of New York, Federal Reserve Chairman Jerome Powell declared that unemployment is hovering at its lowest level in almost half a century at 3.7 percent, inflation is near the Federal Reserve’s 2 percent target, and the economy is growing at a steady 3 percent rate. The Federal Open Market Committee and innumerable private-sector economists have predicted steady economic growth moving forward and the Dow has jumped more than 600 points. Overall, stocks for the rest of the year are expecting to post up bullish results. Yet despite these promising figures, not everyone is cheering.
Less than 24 hours prior to these announcements, the nation’s 10th largest publicly held company, General Motors, announced the layoffs of more than 14,000 employees, or about 15 percent of its workforce. The company stated its intention to wind down seven of its North American plants, with the livelihood of many of its blue-collar and white-collar employees at stake.
Even in a healthy, optimistic economic state, there will always be turbulence that we must account for as employees and investors, as well as members of our community and families. While the upper brass at GM do not see an economic recession in the future, they are certain that the country is one day closer to such an event. Such a proactive measure is certain to cause a rippling effect throughout the communities and supply chain that have bolstered the company for decades.
So, where does the shuttering of GM’s plants leave its former employees and what does this mean for financial advisors?
Low savings confidence
First, let’s take a look back at some recent market surveys. In an August 2016 publication, the CFP Board sampled 1,000 adults with demographics representative of the national population over the age of 25. The findings concluded that nearly half of all Americans agree that their families do not always have enough money after bills to save. Furthermore, a full third of Americans agreed that they have too much debt to pay off to currently save money. Despite these findings, most Americans agree that saving money is their number one financial priority.
Today, 52 percent of Americans feel behind on their retirement savings goals. Social Security and employer-sponsored retirement plans remain the most important sources of retirement income, trailed by income from continuing working during retirement, pensions, IRA accounts, and other investment vehicles. Seeing that market turbulence is a known certainty over time, preparing for periodic downturns and the ensuing financial setbacks is a necessity for both financial advisors and their clients.
The importance of an advisor
Another CFP Board study found that since the Great Recession, only 30 percent of households are financially comfortable or on track with their savings and the majority of those who feel they are on track are currently utilizing a financial plan. Predictably, this group of planners are more confident with their money management, investment, and saving strategies.
Going back to the GM situation, consider how the shuttering of its plants may impact its communities, residents and former employees. While the economy as a whole has a bright outlook at the moment, those impacted by the GM situation are likely feeling much different. Often, the main vehicle people use for retirement saving is through their employer and only 31 percent report setting money aside outside of an employer’s program.
This is exactly where an advisor’s value shines bright. With a holistic, thoughtful financial plan in place, an advisor would be able to help them transition from this setback and remain on track with their goals. Amid the stress that can come from being laid off, clients would undoubtedly benefit from using the NaviPlan® client portal to check on their plan without having to make a trip to their advisor’s office.
Preparing clients for situations like these can be a big selling point for advisors. Using the NaviPlan scenario manager, advisors can run through different situations with their clients and show how they will be taken care of throughout the client-advisor relationship.
To learn more, view our case study highlighting how a private wealth advisory practice with $130 million in AUM increased their revenue, prospects, and conversions rates by implementing NaviPlan.