The COVID-19 pandemic is taking a toll on every aspect of our lives. Investors are nervous, watching the value of their stock portfolios and retirement savings sink, and the global economy grind to a halt. They are worried about their financial security, fearing for their health and safety, and concerned about their loved ones.
These are unprecedented times. But you don’t need to go it alone. Financial advisers can do an important job for you. I compare it to serving as a “financial therapist,” who can help you cut through the chaos, see through the headlines, understand what is driving current dynamics and protect you against emotional responses.
According to our most recent Nationwide Retirement Institute survey of more than 2,000 American adults, 49% say the COVID-19 pandemic made them realize they need help managing their finances and investments to succeed in the future. Roughly one-quarter of Americans (24%) are engaging a financial adviser for the first time ever.
Navigating the New Normal
Pressures have been rising. Just five days after the World Health Organization declared the novel coronavirus a pandemic on March 11, the Dow experienced its steepest decline since the Black Monday crash of 1987. By the end of March, markets had lost more than 35% of their value. Despite the recent rebound, the stock market is far from stable, and volatility remains near all-time highs.
The most recent jobs report, released on May 8, showed that unemployment in April rose to 14.7% and employers shed 20.5 million nonfarm payroll jobs. Companies are cutting salaries and slashing bonuses. Many employees have been furloughed — and many are still in danger of losing their jobs. Congress has signed a bipartisan $2 trillion economic relief plan to offer assistance to tens of millions of American households, but the consensus is that more is needed.
In this emotional time, people are turning to advisers for stability. Advisers are helping clients deal with pressure from the markets, the economy and all the real things that happen to real people in a time of crisis — the impact on their communities, their families’ health and well-being, the loss of lives.
As you navigate this new normal, consider these four benefits of having a financial adviser on your side:
Stay the Course and Focus on the Long-Term
Staying invested for the long-term is key. Having a financial plan and a well-diversified portfolio, structured to help protect you from falling markets, ongoing volatility and record low interest rates, is of the utmost importance. But it’s not always easy to stay calm and stay the course, when markets—and your account values — are falling. That’s where advisers can make a difference, helping you keep your emotions in check and focused on your long-term goals.
As our recent NRI survey showed, only 35% of Americans said they will stay the course and make no changes to their investment portfolios in response to the COVID-19 pandemic, while only 42% said they would stay the course and make no changes to their qualified plans such as such as their 401(k), 403(b), 457 and IRA. Of those making changes, some are locking in steep losses, by selling shares in order to meet their financial obligations or taking money out of the stock market altogether.
The current uncertainty may seem overwhelming. But an adviser can keep you on track. Remember that history is on your side. In the six months following the Swine Flu outbreak in 2009, global markets rallied by 40%. In the six months following the SARS outbreak in 2003, there was a 23% rally. Even following the Crash of 2008, the market recovered in just 4½ years.
Timing the market has proved nearly impossible, so staying invested and riding the volatility has shown historically to produce the best long-term results.
Develop a More Holistic Financial Plan
According to our NRI survey, Americans say their top three financial concerns related to the COVID-19 pandemic are being unable to pay bills or meet financial obligations (45%), losing their life's savings (33%) and losing their employment (30%).
But even in the best of times, managing your day-to-day finances, while balancing your current obligations and your future needs, can be complex and challenging. An adviser can help you see your financial life in a more comprehensive and integrated way, across all three stages of your financial lifecycle — from accumulation, to generating retirement income, to leaving a lasting legacy.
True holistic financial planning is far more than portfolio management. Advisers can help you see the big picture to make your most important decisions. They can offer solutions for risk management, insurance planning and tax optimization. They can develop strategies, from financing your children’s education to caring for your aging parents, from helping you prepare for and live in retirement to creating an appropriate estate plan.
Protect Against Market Risk
Year over year, our annual Advisor Authority study has shown that advisers are more likely than investors to focus on strategies to protect against market risk. In fact, last year’s study showed that 88% of advisers had a strategy in place to protect their clients’ assets against market risk, while only 65% of investors had a strategy to protect their own assets.
Year over year, Advisor Authority has also shown that advisers and investors alike cite diversification as the most utilized solution to manage market risk. Both also focus on safe haven solutions like high-quality fixed income and non-correlated assets, such as gold and real estate. Advisers, however, are more likely than investors to incorporate the use of fixed annuities and fixed index annuities.
Now, according to our NRI survey, heightened uncertainty is driving the need for more financial protection. Nearly half of Americans say the COVID-19 pandemic has made them recognize the need for annuities to protect their investments against market risk (47%) and to protect their retirement income (48%). Annuities can preserve upside potential, provide downside protection and help with longevity risk. But they can be complex, and advisers are best equipped to help you understand how they work, when you should use them and which type is best suited for you.
Protect Your Loved Ones
Americans are also worried about protecting their families and loved ones. Roughly 4 in 10 are concerned the COVID-19 pandemic will impact their ability to fulfill potential caregiving responsibilities, due to financial strain (44%) or due to their own illness caused by COVID-19 (42%). A clear majority of Americans also say the pandemic has made them recognize the need for life insurance (57%) and recognize the need for long-term care insurance for themselves and the people they care about (56%).
Many advisers now specialize in these important issues of eldercare.
Finding the Right Adviser
Advisers top the list of trusted sources for general financial and money management advice during the pandemic. But finding a financial adviser isn't always easy. It’s important to choose someone you can trust, who makes you feel comfortable and whose skills are a good match for your needs. To begin your search, you can start with this educational resource from Nationwide to help you find an investment professional today.
Craig Hawley is a seasoned executive with more than 20 years in the financial services industry. As Head of Nationwide's Annuity Distribution, Mr. Hawley has helped build the company into a recognized innovator of financial products and services for RIAs, fee-based advisers and the clients they serve. Previously, Mr. Hawley served more than a decade as General Counsel and Secretary at Jefferson National. Mr. Hawley holds a J.D. and B.S. in Business Management from The University of Louisville.
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