There is no doubt that COVID-19 has added to peoples’ financial anxiety and woes, as it has compounded job uncertainty, household spending, retirement income and general well-being to name but a few issues.
Now more than ever, it is important not to panic and grasp the basics of financial planning if possible, but even in normal circumstances (not a global panic) over half of individuals between the ages of 35-60 felt they didn’t have a strong understanding of financial planning and 56% of those individuals reported moderate to extreme anxiety around financial management, according to a Harness Wealth.
Katie Prentke-English, co-founder of Harness Wealth says enlisting a financial adviser to navigate market volatility has its advantages and is especially important for high net worth investors who might have multi-faceted portfolios.
Prentke-English believes financial advisers can add value in the following ways:
- Creating a long-term financial plan that’s designed to help grow your wealth is one way to protect yourself because you won’t even need to react in response to a sell-off or recession.
- Better performing portfolios. Advisers can provide assistance with tax efficiency; rebalancing portfolios; and developing the right risk/return profile – all of which can lead to better performing investments.
- Eliminating emotional outcomes. Clients who receive professional financial advice find that the emotional benefits provide significant value. This is especially true during situations like today’s when economic uncertainty can cause money management to become more stressful.
A personal viewpoint: Samuel Blanning, chartered financial planner (CFP)
Blanning says: “We have certainly seen anxiety among some of our clients, but others view it as an opportunity. And the majority are taking no interest in the markets at all, as they neither have spare money to invest nor expenditure needs to meet. They know the panic will be long over by the time they want to withdraw the money. Anxiety does not exist outside the brain and everyone reacts differently.
“We have reminded our clients that while the pandemic may be unprecedented, the stock market crash is not. The 09-20 bull market was the second longest in history and we all knew that another 2008 or 2000 was always going to come at some point. Putting up with short-term falls is the price we all have to pay for higher returns than cash.
“My general tips to anxious investors would be to first accept that anxiety is perfectly normal. Then you can start analysing the issue intellectually, for example by asking: why did I invest in the stock market in the first place? Is this crash different to all the previous crashes that recovered within five to six years? And what can I do about it?
“If global stock markets recover, then assuming they have a balanced portfolio, cashing in would lose money; and if global stock markets never recover, that means the global economy has collapsed and cash won’t be worth any more than real assets. The threat of inflation is never higher than when world governments have been given carte blanche to print money to keep the economy alive.
“Anxiety should not be ignored in the hope it goes away. Anxiety is the brain’s alarm system. When an alarm goes off you don’t ignore it, you get up and look and see whether anything is wrong. Once you’ve satisfied yourself that nothing is wrong and the stock market is just doing what the stock market always does occasionally, you can go back to bed and ignore the markets until they recover.”