Saving retirees from their most egregious spending traps

October 30, 2019 by Tom Burmeister

Tom Burmeister featured on FA-Mag.com

about the author:

Tom Burmeister

Vice president, financial planning

As vice president of financial planning, Tom is an integral contributor to the strategic vision around our financial planning initiatives. Additionally, he is critically involved in all partner interactions, thought leadership contributions, and internal training programs.

In a recent conversation I had with Tracey Longo over at Financial Advisor Magazine, I 

Read the full article below:

Calm clients during volatile markets with technology and a plan

Recently, it seems like investors are being bombarded with more and more headlines about issues affecting the economy like the trade war with China, market-index performance, recession warnings and geopolitical tensions. A single day’s developments can cause panic for investors.

On Aug. 14, for example, the Dow Jones industrial average experienced its largest point drop of 2019 (and the fourth-biggest in its history), falling 800 points; the S&P 500 and Nasdaq decreased as well. The market’s performance that day was touched off by the benchmark 10-year Treasury note’s yield briefly falling under the two-year rate, a phenomenon which has been cited as a possible recession indicator.

The recent volatility and ongoing uncertainty in today’s market underscores the need for comprehensive, living-and-breathing financial plans. Investors can understandably become anxious when hearing about market downturns in real time and may choose to sell or make other rash decisions in the heat of the moment which, later on, they could regret.

Having a financial plan in place that an investor has crafted with their trusted advisor, spelling out instructions for how to react under certain market scenarios, can help investors refrain from possibly self-destructive actions. Furthermore, modern financial planning software enables advisors to interactively demonstrate for clients, remotely and in real time, within their client portal the effects that possible moves in response to current developments would have on their portfolios over the long term.

In this way, advisors can serve as a calming influence on investors during times of market stress, without even leaving their offices.

The financial planning process gives advisors the opportunity to begin collaborating with, and “coaching,” investors before they encounter market volatility. From the very start of the advisor/client relationship, the advisor can harness modern financial planning software to better understand the client’s investment goals and risk tolerance, and run unlimited scenarios to show the client the likely outcomes of different types of strategies and allocations.

Advisors can also run “drills” with clients to walk them through what to do in the event of frightening market drops. Besides running drills, advisors can include steps to protect clients in writing in financial plans. For example, advisors can suggest to clients that they abide by a rule that sales should not be undertaken during market downturns without first discussing them with their advisor. Any such rules set down in financial plans should be reviewed with clients during annual and quarterly meetings.

During the process of creating financial plans, and during every review of plans thereafter, advisors can discuss how different types of investment strategies and asset classes tend to perform during market volatility, and which combinations can help weather market storms and deliver returns even in volatile conditions. These discussions help advisors work with clients to select strategies and asset classes that would best help clients meet their goals (and protect and grow their wealth) over the long term.

In addition, advisors can utilize the more advanced financial planning software available today to create more detailed plans that show clients a clearer picture of their overall wealth. With some software options, these holistic plans can be viewed in the client portal, and clients can run scenarios themselves to see the potential impact specific strategies, allocations and investments would have not only on their portfolios, but on their wealth as a whole. During periods of market volatility, the ability to see that day-to-day market performance isn’t having a drastic effect on their overall financial picture can be calming for investors.

Our relationship with money can be a highly emotional one. During market downturns, anxiety and fear can wreak havoc on an investor’s emotional state — but by harnessing modern financial planning tools and software, advisors can help calm investors during market storms, and prevent them from making decisions they may regret when conditions normalize.

Helping investors keep their emotions in check is a meaningful way for advisors to foster personal connections at a time when (according to Capgemini’s World Wealth Report 2018) only 55.5% of high-net-worth investors feel they are strongly connected to their wealth managers. With global high-net-worth individual wealth on course to exceed $100 trillion by 2025, as per Capgemini analysis, advisors need to consider financial planning software and other innovative tools to help them navigate these types of situations and give themselves an edge over their competition.

-- via ThinkAdvisor.com, published on September 13, 2019.

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