Financial Planners Amid Market Turbulence

by | Apr 16, 2020 | News Room Media


April 16, 2020 | Larry Light

The stock market has come back to a degree from the month-long swoon that ended March 23, with the advent of help from Congress and the Federal Reserve, rescue efforts, Yet it still is down almost 17% from its Feb. 19 peak, and Wednesday’s dip reminds us that rocky times may lie ahead, especially with so many punk earnings results coming.

And no one can predict what the market will do if the pandemic grinds on and the economy falls even more. How does a financial advisor deal with this? We turn to one the most astute and empathetic advisors in the business, Rick Kahler, the founder of Kahler Financial Group, in Rapid City, S.D., to find out:

Larry Light: How has your job changed amid the virus crisis?

Rick Kahler: Nothing compares to the medical caregivers who are saving lives, sometimes at the cost of their own. Those whose work focuses on two other components of well-being—emotional and financial—are not risking their lives caring for their clients. Yet their worlds look very different today than they did a few weeks ago.

During times of financial crisis, the workload of a financial planner or investment advisor increases significantly. Buying and selling stocks and mutual funds, rebalancing, and loss harvesting that are so mundane in normal markets take on an intensity that demands hour-by-hour monitoring when markets turn volatile. One slip-up could be financially harmful.

Light: And clients need more personal attention.  

Kahler: In addition to the increased technical workload, there is usually a surge in contacts from concerned and panicking clients. This necessitates a financial planner spending much more of their workday communicating with clients by phone, virtually, in person, and via written communications.

Understandably, with most financial planning firms it’s all hands on deck during turbulent market times like we’ve witnessed over the past month. Financial planning often takes a back seat to handling the crush of demands created by the investment crisis. Throw a once-in-a-century pandemic into the mix, and the burden of caring for clients and their financial well-being can quickly get overwhelming for the most experienced and prepared practitioners.

Light: You’re in contact with many other advisors. What’s their experience?  

Kahler: Recently, through a national webinar for the Financial Planning Association on the current financial, health and economic crisis, I surveyed 80 or so planners regarding a number of things. At the time of my survey the current bear market was a newborn at just 11 days; on average most bear markets last 17 months. 

What I learned was that 83% of the planners were experiencing very little emotional trauma from the current crisis. Perhaps that is because only one-third of planners had received calls from more than 25% of their clients, with just 12% having heard from more than 50%. I suspect we will see planners’ emotional well-being decline in direct proportion to the length of the crisis and the increasing number of clients who call concerned or wanting out of the market.

Light: How have they been affected financially? 

Kahler: One of the biggest concerns for most financial planning and investment companies is that their income is tied to the value of the assets they manage for clients. During the 2008 Great Recession, it wasn’t unusual to see financial planning positions eliminated or salaries reduced by a third as income dropped proportionately with falling markets.  

Only 53% of the respondents were sure their companies had sufficient reserves to weather a 20% to 30% drop in revenues. Around 39% said their companies were or might be contemplating cutting salaries.

Light: How are they re-arranging how they do business?

Kahler: The pandemic has added an additional layer of challenge not present in the 2008 Great Recession. Over 70% of those surveyed had closed physical offices and were working from home due to the demands of social distancing.

Of those, 65% found working from home to be almost as efficient as being in the office; 35% did not. About half of the planners surveyed had or intended to hold webinars or virtual town hall meetings with clients to keep them informed.

Light: How are these advisors coping emotionally in this demanding time? 

Kahler: Fortunately, 61% of the planners said they have an emotional support group where they could safely talk about their emotional struggles. Still, 39% said they had no one to go to for emotional support, which is concerning. Those who care for clients’ well-being, whether physical, emotional or financial, can only do so effectively in the long term by also caring for themselves.

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