The pandemic upended many aspects of Americans’ lives, and financial planning was one of them. But with brighter post-COVID days apparently on the horizon, financial planners pretty much agree on one strategy: Stay the course and stick to the basics.
“Our clients went through a lot over the past year, and they still have doubts and are questioning investments, especially in the near term,” said Chad Arrington, a partner with the Kelly Group, a financial planning company in Bel Air. “But we try to step back and let their planning be a reference guide for why they invested in a certain way.”
Some clients, he said, have changed their goals – they want to spend more on home improvements because they’re at home more, for example, or they are considering moving since they’re not tied to an office in the area any longer. In those cases, he said, changes in investments might be in order.
But assuming they’re diversified and “reasonably invested,” Arrington said, “we’re not changing our investment advice based on short-term market projections.
“Our focus is on longer term planning,” he said. “If you get the planning right, save enough money, work long enough, it’s all OK.”
Karen Brelsford, a certified financial planner based in Columbia, said she has always tried to convince clients to set aside the money they will need for emergencies, and after so many people lost incomes during the pandemic, “they finally get it.”
In fact, she said, one lesson of the pandemic is that the traditional six months of expenses set aside is not enough — not when you’re out of work for a year and unemployment is drying up. “It’s just basic financial planning,” she said.
Eric Brotman, president and managing principal of the Brotman Financial Group, based in Timonium, agreed that not a whole lot has changed in terms of the fundamentals of financial planning.
However, he said, the massive spending necessitated by the pandemic is going to have an impact on taxes – essentially, the government will need more money to cover what was spent. How IRAs and other retirement-related matters are sheltered from taxes is going to change, he said, and investors need to take that into account.
“People have to watch how their savings and investment strategies need to change as a result of what happens on Capitol Hill,” Brotman said. “The biggest threat we face as a country right now is deficit spending and the tax policy that’s on its way. “
Complicating matters is the fact that the specific tax policies won’t be known for a couple of months. And that, Brotman said, make it even more important for investors to get sound financial advice.
“The fundamentals have not changed, but the tax gauntlet we’re going to run through is significant enough that is imperative you get good advice – not only from your financial advisors and your accountants, but also your estate attorneys,” he said.
Brotman was not the only financial advisor to stress the importance of professional advice post-pandemic.
While many people have learned a valuable, in many cases painful lesson about the importance of saving, Brelsford said, she wondered how long they would remember it – and would be able to figure out what to do on their own.
Her advice: “Get a certified financial planner to lay out the groundwork before the next pandemic comes, and there will be one.”
It’s advice many people might be ready to follow. A survey by the Nationwide Retirement Institute found that the number of investors who have an advisor or financial professional increased from 51 percent in 2016 to 67 percent last year. Investors’ top reason for using and advisor, the survey found, was to feel more confident in their financial future.
Meanwhile, in an August column in Kiplinger’s Personal Finance Magazine, an executive for the multi-national financial services company Charles Schwab reported findings from a Schwab survey that found two-thirds of Americans were savers in 2020 as opposed to spenders, and that 80 percent planned to be even bigger savers in the year ahead.
The columnist hailed the changes and recommended that, post-pandemic, people assess their financial preparedness for the unexpected and consider building emergency savings, contributing to a heath savings account if eligible, and make sure they have adequate insurance coverage.
The Kelly Group’s Arrington said many of his firm’s clients are already turning to his firm for post-pandemic advice.
“Last year was quite the roller coaster of a year,” Arrington said. “But we’re there as a sort of sounding board, to ease any concerns and bring our clients back down to ground level – to make sure they stay focused and disciplined in their planning.”