What May Keep Working During the Pandemic Recovery

Hindsight is 20/20 as they say – and as we look back on the year 2020 the idiom serves us well.

Entering the second quarter of 2021, financial advisors across America are sharing what strategies worked as they advised their clients throughout the unprecedented Covid-19 pandemic – and how it shapes their approach moving forward.

Asset Segmentation

2020 proved it pays to have monies in more than one financial bucket.

“Despite the recent rise in correlations across asset classes, it still makes sense to spread out your bets,” was the subhead on a March 30, 2021, MorningStar web article written by Amy C. Arnott, a portfolio strategist with the organization based in Chicago, Illinois.

Noting that the bear market created by the COVID-19 pandemic was “unusually swift and severe,” Arnott also wrote that “basic portfolio diversification helped to buffer some of the losses.”

For example, a basic mix of 60 percent stocks and 40 percent bonds lost 13 percentage points less than an equity-only investment portfolio during the market downgrade associated with the COVID-19 pandemic.

This “lack of loss” proved true for the clients of Tim Clairmont, founder and CEO of Clear Financial Partners in Lake Oswego, Oregon, who stuck with diversification of their investments.

“Our bucket planning and insurance strategies performed extremely well during the COVID crisis of last year,” he said. “By segmenting our clients’ assets into accounts that are earmarked for immediate use, near-term use, and longer-term use, we were able to allow the longer-term assets to remain invested through the stressful March and April of last year.”

Annuity Education Paid Off

Some may find it puzzling that annuities – which take several years to mature – are being listed as what went right during the pandemic.

Here’s the numerical reason why.

Fixed annuity rates ranging from 2.30 percent to 2.85 percent are an attractive – and safe – alternative to U.S. Treasury bonds currently offering only 0.70 percent, David Lau, CEO of DPL Financial Partners based in Louisville, Kentucky, said in a Financial-Planning.com article.

“Sometimes you unfortunately need an event to cause people to pay attention and I think this (COVID-19) really highlighted the risks that are in portfolios, along with the benefits that annuities can provide,” Lau said.

Here is another reason why annuities were helpful and will continue to be helpful during the economic recovery from the pandemic: an annuity and its guaranteed payout upon maturation provides future economic security.

“Owning annuities allowed the clients to ‘own’ their investing decisions,” Clairmont said. “Clients who had chosen to protect their income streams with variable and fixed annuity contracts rested without money worries during the tumultuous stock market woes and dreads of last spring.”

Going Virtual

If you didn’t know how to participate in Zoom video-conferencing before the pandemic, most likely – if you are still in business today – you have learned.

For Lisa A.K. Kirchenbauer, founder and president of Omega Wealth Management, LLC, located in Arlington, Virginia, use of virtual meeting technology during the pandemic proved that preparation in 2019 – before the pandemic – was a prudent investment.

“Luckily, we were fairly well-prepared both in our work with clients and for the business,” said Kirchenbauer. “We had already begun doing video-conferencing in 2019, so we had some capabilities and built on those.”

She isn’t alone.

On December 31, 2019, Zoom Video Communications, Inc. – its official name – had 10 million daily meeting participants logged on. That number jumped to 300 million – an unheard of 2,900 percent – by April 21, 2020, as reported by Business Insider.

“This is the preferred video conferencing service. There’s no doubt about it. This is what users prefer,” said Jason Hall during a Fool Live episode of The Wrap on March 2, 2021. Hall is a regular Motley Fool contributor and disclosed, as per MF policy, that he does own Zoom. “This is what companies prefer to use. I think in a lot of ways, 2021 is going to be more important to Zoom’s future than 2020 was.”

All of this to say that Zoom has two applications for financial advisors: remote, contactless connection with clients and – possibly – a prudent choice to select for long-term investing.

Being Proactive

Being willing to “take the bull by the horns” was a key objective during COVID-19 as advisors who remained committed to communication with clients were able to keep more of those clients invested.

“During times like these, a lot of emotions are created. During time of high emotion is when we see the most mistakes being made,” said John J. Parrillo, a wealth manager at Wealth Navigation Advisors in San Diego, California. “Being proactive means being the voice of reason for your clients prior to the noise affecting them, and as a result they can counter their peers by responding with the sound logic you bestowed upon them.”

The topic of intentional, skilled communication was addressed in March as the Association of International Certified Professional Accountants (AICPA) met online during the 2021 Personal Financial Planning (PFP) Summit to discuss the skill sets financial professionals would need to be successful in 2021 and beyond. Thought leaders participating in the Summit concluded:

“The top three most cited skills planners will need, in addition to technical skills, are emotional intelligence, interpersonal communication and adaptability.”