A year ago, my husband and I began the transition to retirement, downsizing to a gem of a small home in a pristine community in the Low Country of South Carolina, and planning to travel 60 to 90 days a year, taking our children and grandchildren along as much as possible.
Fast-forward.
Now we are hunkered down with one adult son working remotely from our home while another son, daughter-in-law and grandchild live an anxious existence in Manhattan. The pandemic immobilized us, and now the protests over social injustice and racism force us to face other ills and dangers in our society. The world has tilted out of balance, and so have we.
Where do we go from here, as individuals and families, as communities and as an industry? These times are uncertain, but I have a few thoughts about changes in consumer psychology and behavior, and ideas about how advisors can connect in new ways, on a new level, to support their clients.
Existential Threats And The Consumer Psyche
Today’s retirees, pre-retiree Gen Xers and millennials have had a trifecta of soul-shattering experiences in the last 30 years. Everyone remembers 9/11 and the feeling of omnipresent danger. Seven years later, we had the Great Recession, an implosion that made finances, already scary, terrifying. And now there’s Covid-19—an insidious, mutating virus that has made us think about horrible trade-offs like death tolls against economic priorities. Add to that the overboiling, divisive political climate, the racism, social inequality and protests made visceral in the media, and it is no wonder nearly a third of Americans in a recent survey by the University of Southern California and the Gates Foundation reported feeling depression and anxiety.
Today’s malaise is multidimensional and existential, and it is affecting people all over the world on different levels. Existential threats leave people disoriented and out of balance, raise questions about meaning and purpose, and underscore the lack of human control. Unlike economic blips or even wars with a beginning and an end, this kind of altered state is hard to pinpoint and harder to solve. While we will persevere and find some recovery, the trauma is likely to be imprinted in our cultural DNA for years to come. As advisors work with clients, the emotional factors they face may be as or more important than the pure financial considerations.
My advice: It is time to lead with your heart.
A Change In Plans
In most cases, the right financial prescription for clients in turbulence is to recommit to their plan, but in these troubled times a fresh look and perhaps an overhaul may make better sense. At the very least, it is time for an honest and emotionally connected conversation about important priorities:
1. Where and how to live: Take my own situation. We are empty nesters who had downsized, but this month we put an offer on a different, more expensive Low Country waterfront property in South Carolina large enough to house a dozen or more if our kids need shelter. We made a 180-degree shift in our original plans for living small and traveling around the world, because suddenly our priorities and values had changed. Our advisors listened, understood and supported the decision.
Our smaller house was sold to a couple in their late 40s who have decided to get the heck out of Chicago and have permission from their employers to work remotely from South Carolina. What was once debated as a flexible working arrangement has been tested and refined during the quarantine, with far-reaching implications for employers, employees, industries, regulators, financial markets, etc. This story will play out, but for the consumer mindset the possibility of working remotely makes less expensive suburbs, rural towns and smaller cities appealing.
The phrase “room to breathe” is now a literal priority. Helping clients think about possible lifestyle changes, and advising them on making transitions, is one way to strengthen your bond and add tremendous value.
2. Education choices and funding: With the emergence of online classes at a time when campus life is restricted, are expensive schools worth it? That depends on your priorities and the trade-offs you are willing to make. My guess is that over the long term we will see the finest or most specialized schools retain prices and perceived value, while lower tier institutions suffer. Even the top schools may integrate online and campus programs, motivated by the need to keep costs down and reduce density in school buildings. Campus life this fall will either make or break the value proposition for many schools, which has administrators and alumni very worried.
No matter what happens, the debate about the value of private schools, colleges and advanced degree programs has heated up since Covid-19 cooled down the overall on-campus experience. The longer it takes for life to return to normal, the more likely it is that parents and students will demand lower tuition costs, as well as consider community college or trade school alternatives. For advisors and clients, it is an opportunity to rethink financial commitments, including the weight of student debt. But it will not be easy. Funding the best education has been a critical goal for many families. The question today is, what does that mean?
3. Planning for now and the future: Whether it’s baby boomers opening their homes and wallets to their children, Generation X facing another setback in retirement savings, or millennials dealing with job losses, many retirement plans have taken a hit in the past months. We had already seen a trend of redefining and postponing retirement, and that will be accelerated by both necessity (since people will need more in savings) and opportunity (they will also be able to work remotely). Even so, now may not be the time to focus clients on the retirement time horizon. It may go against our nature as wealth managers and planners, but it’s not really about money right now. It is about life, and all people want to know is how you can help them get through this time.
Are they OK for the next year or so? If not, what are their options? Long-term planning, asset allocation and diversification will work in clients’ favor over the long term, but you should be prepared if they scoff at the historical charts and future models. The stock market goes up, but we also know volatility is like a roller-coaster. Don’t focus on it. Leave those details for another day. In the hierarchy of needs, clients just want to know they are safe.
Advisors With Heart
Since I have shared my own experience and change of plans, I want to describe the experience with my trusted advisor and her team during this time. There has been plenty of communication, but what I appreciated most was a text that simply said, “Been thinking of you and your family. Hope everything is OK!” It had been a rough day, as our grandson was born prematurely in an NYC hospital. We kept in touch by text and cell phone, and when I told my advisor we wanted to create a family compound and were willing to cut back on travel, she and her team worked over a weekend to model different scenarios for me and my husband to feel confident that we could move forward without compromising our financial security. We had a videoconference Monday morning with the advisory team—the financial planner calling in from his fishing cabin, the portfolio manager at home in her office, and my advisor (and friend) with three children in the background juggling seamlessly as women do.
It does not get more real than this. For every advisor who has worried about defending their fees to price-conscious clients, now is the time to earn them, and keep clients for life.
Advice from the heart.
Gail Graham is principal of Graham Strategy and previously served as chief marketing officer at United Capital.