The pandemic has prompted family members to have more conversations among themselves about finances, which can be both good and bad for advisors, according Mike Fessler, an advisor with Edward Jones in the Portland, Ore., office who specializes in retirement planning..
The conversations are causing people who have not had advisors before to turn to them for assistance, but the talks also are making some who already work with advisors to switch firms, Fessler, who hs more than 20 years in the financial business, said in an interview.
“There is a lot of uncertainty now, which has caused the financial industry to change in the last year,” Fessler said. “More clients are trying to truly understand what their personal goals are. Advisors need to understand their clients’” new mindsets. “This is not just about planning for retirement or managing to an index;” it is about major lifestyle changes and finding purpose. “We have seen clients switching advisors, but, on the flip side of that, we have seen advisors switching firms because they are questioning the missions of their firms.”
A study by Edward Jones and Age Wave, an advocacy and research organization on aging issues, found that 33% of U.S. adults said the pandemic triggered conversations with close family members about their end-of-life plans and preferences. At the same time, 18% broached topics about finances, health and legal plans for the first time. “Tough conversations are happening more frequently, especially for individuals who did not have plans in place pre-pandemic,” Edward Jones said.
“These conversations come at an opportune time, as 66% of Americans reported that the pandemic has made them think more about the kind of legacy they want to leave to their families. Lasting memories from shared experiences, life lessons and values, and an inheritance are the most important things Americans age 50 and older wish to leave behind for loved ones,” the study said. The study, “Pandemic Prompted First-Time Legacy Planning Conversations for 44.5 Million Americans,” included 2,020 U.S. adults.
In addition, 21% of respondents who were working with financial advisors said they switched advisors during the pandemic, and one quarter who did not have advisors said they began working with a financial advisor for the first time during that period.
As an example of pandemic-prompted planning, Fessler said one of his clients “took a step back from his daily life to consider what he wanted to accomplish.” The client decided one thing he wanted to do was to help his only granddaughter go to college. He and Fessler drew up a plan to set money aside to accomplish that goal.
“It helps when the advisor asks what the client wants and then to put it down on paper,” Fessler said. “This is a way to have deeper conversations about what we call the Four Pillars: family, health, purpose and finances. Having a purpose makes retirees feel useful, and feeling useful makes them feel youthful. Advisors are getting better about asking these questions.”
Another aspect of pandemic-prompted change that cuts both ways, which was shown by the study, was that nearly 50 million Americans halted or reduced contributions to retirement savings during the pandemic, and an additional 38 million withdrew money from retirement savings. But, at the same time, 59 million Americans began contributing more to their retirement savings.