Advisors debate talking with clients about
what to do if a viral pandemic strikes U.S.
A wide diversity of opinion exists over what
financial planners should be telling clients about any looming
pandemic, or whether they should say anything at all. Most medical
experts agree the world is ripe for the rapid spread of some
virus-based disease, but no one knows whether avian flu, which is
currently striking poultry in Asian countries, is the one that is going
to start hitting people and spread of around the world.
"Is it Y2K again, or is it 9/11?" asks John H.
LeBlanc, CFP, founder and principal with Back Bay Financial Group Inc.
in Boston, Mass. "No one knows, but clients have been asking about it,
so we have to start to discuss the possible effect on our clients and
on their investments."
Avian flu has killed more than 120 people, mostly in Asia, and has
forced agriculture workers to kill millions of poultry in numerous
countries to try to stop the spread of the virus. So far, it is being
spread almost exclusively among fowl. The possibility that the virus,
known as H5N1, could mutate and spread from person to person is what is
fueling fear in medical circles around the world. Law enforcement,
medical and government officials in almost every country, including the
United States, are developing plans for how to react if the avian flu
virus, or some other virus, starts to spread.
Based on past pandemics and on the increased
mobility of today's population, it has been estimated that as many as
two million people in the United States could die, with many more than
that needing hospital care; many businesses might be closed or
operating on an emergency basis. Estimates of losses to business
worldwide are all over the map, but the Congressional Budget Office has
predicted that the U.S. gross domestic product could fall by 5%. In
reality, no one can know the potential loss, according to the American
Academy of Actuaries, but it would be significant.
Like other businesses, financial planners should at
least be considering how to continue functioning if a large percentage
of their workforce becomes ill. "If avian flu spreads to the United
States, employers will need to be prepared to deal with reduced
workforces, expanded telecommuting, security issues, communications and
a host of human resources issues," say Aspen Publishing and Thompson
Interactive, which held a recent teleconference for business owners in
pandemic plans.
Although he dismisses the idea of talking to clients
about a pandemic, Rick Brooks, CFP with Blankinship & Foster,
family wealth advisors in Solana Beach, Calif., said even his firm is
planning a disaster drill and has all of its data backed up in a
computer off site.
"We are thinking in terms of wildfires or
earthquakes more than a pandemic," Brooks says. "You have to take into
consideration what you can manage and what is probable, and other
things are much more probable than a pandemic."
Other advisors disagree, in part because they have had clients raise questions.
"We did a lot of planning for Y2K for nought, but clients were
concerned, as they are now. We are telling them not to panic. We have
contingency plans for communicating and for making investment trades,
even if we cannot get to work," LeBlanc says. "Some of the reaction
will be emotional, rather than factual, but that could create market
volatility."
Diana Davis, CFP, an independent broker dealer in
Springfield, Va., feels advisors should be talking to clients in terms
of having enough assets on hand to operate if they are sick for 30
days. She has presented seminars to investors and business owners on
what to consider.
"It is a contingency we need to be prepared for,"
she says. "What if they have to stay home with sick children for
several weeks? Do they have cash on hand? Credit cards may not work if
banks are closed. A pandemic is not likely, but it could have a huge
impact."
One of Davis's clients, Nancy Moulton of Washington, D.C., says it is a
matter of the "sleep test." "What is keeping you up at night? It is
something all planners should be talking to clients about," says
Moulton. "Do they have enough liquid assets if the banking system is
disrupted?"
Frank Buress of Buress Financial Services in Green
Bay, Wis., says, "Some of our clients have asked will they have access
to their money and how will we continue to operate. We need to satisfy
people that they will be able to reach us. Where money is affected, you
should always be concerned."
What If ... ?
August 2006
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