If you don’t make a good faith effort to get clients to engage in the planning needed to handle and pay for long-term care, you are missing an opportunity to add tremendous value, whether or not your client ends up buying a policy.
Basing A Financial Decision On The News
This is not the kind of mistake made exclusively by retirees, of course. But there’s an added layer of tragedy attached when retirees make it. Just at the point they have achieved their dream of financial independence and should be enjoying the rest of their lives, the news makes them feel more out of control and stressed out than ever.
The Covid-19 crisis showed us the importance of making tactical decisions in the context of a larger strategy. At our firm, we saw the crisis as a time not to give in to stress but to think about tax-loss harvesting, rebalancing, Roth conversions and a few other things. So we ended up moving a lot of money around for clients last spring.
We did not do this out of fear, nor did we make these changes based on a prediction of where the markets would be in the short term. We made these tactical decisions based on the overwhelming evidence that they were likely to add value when a bear market came and went. Moreover, we only made the moves when they fit an individual client’s strategy.
People following the markets often come across events that seem to be “unprecedented.” And people inundated with disturbing information don’t realize that every time before has been “different” too. The cast, settings and plotlines of the previous dramas all vary, yet the ending is always the same. Businesses adjust and market values, in the aggregate, recover in time.
As reliable as market recoveries are for truly well diversified investors, one other reliable outcome of bear markets is that they are always stressful in real time, and the media only make the stress worse.
The media should report on a crisis. It is real news. Still, most of what is broadcast in trying times is highly unlikely to be helpful to people making important financial decisions. The news ranges from negative to highly alarmist, biased or worse depending on how professional the outlets are.
But the news can lead people astray even in calmer times. Whether it’s the markets, the economy, tax code changes, political matters or myriad other issues, there is always something to worry about. It may be legitimate news, but the way people ingest it is typically problematic. Confirmation and recency bias abound.
If I could ask about only one activity of a prospective client, it might be, “Do you watch the news regularly?”
A yes would get a simple follow-up: “Are you willing to quit?”
It bothers me to be so blunt about it, but I see too many retirees radically shrink their time frame and make speculative decisions in times of crisis, reacting to a media-induced fear of a pending crisis. What they should do is re-engage in the planning process and recommit to their plans.
Don’t get me wrong. I believe citizens have a duty to stay informed and participate thoughtfully in the world. I just don’t see much of our media aiding that effort.
Professional planners talk about focusing on things that can be controlled. If I could teach clients only one thing about financial planning, it might be how to control their intake of news. They should watch enough to stay informed, but not so much that they work themselves up and toss aside a sound strategy trying to predict next month’s news, which is a much more stressful task.
If we don’t help our clients develop better skills in this area, they will have trouble maintaining their resilience. And the ability to help clients with this may be one of the most important skills planners possess.
Dan Moisand, CFP, has been featured as one of America’s top independent financial planners by numerous magazines. He practices in Melbourne, Fla. You can reach him at [email protected].