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How wealth advisors can help clients feel secure in their investments

May 6, 2020


In these difficult times, financial advisors explain how others can help their clients and prepare them for an uncertain future.

The coronavirus outbreak has sent shock waves to the global economy, triggering a fight or flight response from many investors. Amid all the uncertainty, financial advisors play a vital role in ensuring their clients’ investments are protected.

Recent news about the COVID-19 pandemic are distressing, to say the least, and these could send faint-hearted investors on the edge. In this period when ‘plummeting stock market’, ‘global downturn’ and ‘virus contagion’ dominate the headlines, advisors are expected to provide enlightenment, and make sound and rational decisions to keep their clients’ investments safe and secure.    

For more insider tips and expert insights on how you can shore up clients’ investment portfolios in the time of the pandemic, join WP’s free online event “It’s Time to Shine: Proving Your Value as an Advisor” on May 13. Sign up today and gain access to this exclusive event!

The importance of being prepared
Several experts believe that being proactive during these turbulent times is the right way to go, but ample preparation is still crucial. Advisors should evaluate all potential outcomes and assess the worst-case scenario in order to make informed and comfortable decisions.

“I believe that if you have prepared and planned appropriately, you will never be forced to react to a situation and instead you will respond appropriately,” wrote Grant White, portfolio manager and investment advisor at Industrial Alliance Securities Inc, in a story for WP.

He added that because reactions are more of emotional responses, they can result in too many mistakes and poor decisions.

“In evaluating the potential outcomes of a decision, I can also formulate a plan for the worst-case scenario and know what I would do in the event things go that way. Most importantly, I would know whether I am comfortable with the potential outcomes and what I would need to do if things don’t go as planned,” he said.

Tom Caldwell, chairman of Caldwell Investment Management, and CEO and director of Urbana Corporation, told WP that helping people deal with the highs and lows of market volatility is vital at this time.

“There's two parts to my job. One is discerning what's important against a whole bunch of background static and then putting my own interpretation on it. The other part, which is more than half of my effort, is helping people quell their emotions. More money is lost on emotions than anything else,” he said.

How to help your clients recession-proof their retirement plan
Due to the volatile market swings brought about by the COVID-19 crisis, experts believe recession is inevitable. The latest figures from Statistics Canada estimated a 9% economic contraction in March and a 2.6% contraction in the first quarter of 2020.

In an interview with WPTV, Rob Tétrault, portfolio manager and senior vice president at Tétrault Wealth Advisory Group at Canaccord Genuity Wealth Management, said he expects the numbers to be “dramatically worse” from April to June as the economy feels the brunt of the pandemic’s economic impact.

Now is a good time for financial advisors to review clients’ portfolios to make sure their retirement plan will be resilient enough to withstand the country’s unavoidable tumble to recession.

Diversification is the one of the keys to building a more robust portfolio that can weather drawdown periods such as recessions or bear markets. Advisors can do this by investing across the spectrum in equities, both in market capitalization and geography, but also in traditional fixed income. The added security can be measured by the increased profits a diversified portfolio brings in compared to an individual investment of the same size.

Financial advisors also need to think about how to balance their clients’ short-term retirement income needs in a recession, with their long-term needs for future income. This prevents them from tapping assets that are intended for long-term savings for short-term needs.

Is inflation coming?
After being hit with its highest inflation rate in a decade in November, Canada’s annual inflation rate tumbled to a near five-year low in March amid the government-imposed lockdown and sharp drop in gas prices.

The latest StatsCan numbers showed that the annual rate dropped to 0.9% from 2.2% in February as the coronavirus pandemic and an oil supply war hammered the energy sector. The rate was the lowest since the 0.9% registered in May 2015.

The Bank of Canada foresees overall inflation to drop to around 0% in the second quarter.

Amid anticipation of almost zero inflation in the near future, Forstrong Global president and CIO Tyler Mordy told WP that he believes the conditions for a long period of higher inflation have arrived and that the coronavirus crisis has only accelerated this trend.

However, Mordy is not forecasting rampant 1970s-style hyperinflation but rather inflation stealthily building over time and expects a robust inflationary period in three to five years.

“Going into 2020 lots of excess capacity has been used. Obviously, coronavirus has interrupted that but, if you take the virus as a transitory shock, which we believe it is, we'll be back to trend soon enough.”

“Importantly, on the policy side, in the 1980s, central bankers were hell bent on fighting inflation. In hindsight, however, they overreacted. Now we have the opposite; we have policymakers hell bent on fighting deflation and we would argue that they've also overreacted, sowing the seeds for this inflationary environment,” he said.

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