File photo / Jim Neuger
Bryan Thompson, owner and CEO of Thompson Financial Group
Updated: May 4, 2020
Focus on Wealth Management and Retirement
Maine wealth advisors are offering calm counsel for an uncertain time
Photo / Tim Greenway
Molly Reinfried, a certified financial planner, is chair of the financial planning group at HM Payson in Portland.
By Maureen Milliken
In these uncertain times, there’s one thing Molly Reinfried can be sure of — when clients at HM Payson get in touch, they’re going to say something like, “I know what you’re going to tell me to do, but I want to know why I shouldn’t be changing things.”
The market has stabilized a little after the first plunge in March when it became clear what restrictions related to COVID-19 would mean, but investors are still hungry for reassurance.
“There are more up days versus down days,” says Reinfried, chair of financial planning for the Portland firm. “But the timeline is unknown. Who knows what things will look like?”
Wealth managers have a unique task these days — trying to keep clients calm and on track in light of a global pandemic and unprecedented market disruption. Mainebiz caught up with a few to find out how investors are doing, and what advisors are telling them to help them weather the financial storm.
In general, keeping clients on track comes down to mindfulness, she says. That means not overreacting to market fluctuations and things they have no power over. “Have some control over the things you can control, like spending and savings.”
No panic, but anxiety
Bryan Thompson, CEO of Thompson-Hamel in Presque Isle, says what clients are feeling isn’t so much panic as a “raised level of anxiety.”
“Mostly because they are out of their routine, feeling stuck to their home, [some] having to homeschool while working.”
Helen Andreoli, founding partner and CFO at Great Diamond Partners in Portland, says in general the firm does a significant amount of planning work to determine appropriate investments, and that has helped keep the panic at bay.
Other factors are consistent conversations with clients about their cash needs and developing plans to cover those needs so that investors aren’t forced to sell into a volatile market to cover living expenses.
“Our clients are wonderful people who recognize that the world is facing bigger issues than stock market volatility, so they have been able to keep a healthy perspective,” she adds.
Geoff Alexander, CEO of Portland-based R.M. Davis, says while he hasn’t seen much panic “there is plenty of conversation around the disturbing reality that our physical wellbeing is in jeopardy, and that the post COVID-19 world will look different.”
“During this very short period of time, it would be understandable for most investors’ sense of financial security to be undermined to varying degrees,” he adds. “After all, it’s human nature to feel the pain of a 10% loss more than the pleasure of a 10% gain.”
With that in mind, here are the advisors’ top five tips for investors:
1. Check in and review goals
Reinfried asks clients about goals,“How did you start this year?”
Whether the goal was to make higher mortgage payments, or save for retirement or a child’s education, she asks if that’s changed, and if adjustments are necessary.
If someone’s income hasn’t changed, they should operate as normal, she says.
Some people may have more income if they’re working from home, not commuting and not spending money the way they normally would. “Do we do more with that savings?” she asks.
The check-in may include rebalancing an account to stay on target for future goals.
Andreoli puts it this way: “Don’t put your head in the sand.”
To investors who have worked on a plan, either on their own, or with an advisor, she says, “Now is a great time to revisit that plan and determine if and/or how this could impact your longer-term goals. The sooner you get ahead of any planning changes you need to make, the more sound your plan will be.”
Thompson agrees. “Successful investors act on their plan,” he says. “While failed investors react to the market. And in the wrong way.”
2. Keep an eye on cash flow and capital
It’s the topic no one likes to talk about, Reinfried says. “I don’t like to call it budgeting,” she adds. “I like to think of it more as moderating your spending.”
Going over the past year, or even a few months, of expenditures, and figuring out spending patterns can help rein in things like stress spending, and ensure there’s money available for emergencies. “Things pop out to you that you may not even realize,” she says.
Andreoli says, “If you have enough cash flow and/or savings to cover your needs, you won’t be forced to sell into a volatile market and riding this volatility becomes a little easier.”
Alexander takes it a step further. “Always maintain sufficient capital in safe assets, such as cash and fixed income, so that you never need to sell equities at an inopportune time.”
3. Take the emotion out of it
“Don’t succumb to emotional decision making,” says Alexander. “Don’t fall prey to the human tendency to project recent past experience into the future.”
He adds, “It’s probably a wise idea to moderate the amount of time listening to the news.”
Photo / Courtesy R.M. Davis
Geoff Alexander, CEO of Portland-based R.M. Davis, cautions: “It’s human nature to feel the pain of a 10% loss more than the pleasure of a 10% gain."
Andreoli agrees. “Take the emotion out of investing,” she says. “A lack of discipline can lead people to sell into volatility which ultimately can impact returns negatively over the long run.”
Thompson says following emotions is part of human nature. “Human nature is your enemy,” he says. “Human nature cannot distinguish between temporary declines.”
4. Stick to a plan
“Successful investors act on their plan, while failed investors react to the market,” says Thompson. “And in the wrong way.”
Reinfried agrees. “In a lot of cases, the best advice is to simply stay invested.”
Clients who understand what they own and why aren’t as affected by the big swings the news focuses on, she adds. “You need to make two right decisions,” she says. “You need to know when to get out, but you also need to know when to get back in.” The first decision is a lot easier than the second — once people get back in, it’s often later than they should have.
Understanding, and having faith in, a plan can help investors “avoid a lot of heartache.”
In five years, Reinfried says, the market will be better than it is today. “You really don’t need to worry about the next 12 months” if the plan makes sense.
It’s the advisor’s job to understand the portfolio and how each one is specific to an individual client’s needs, Reinfried says. Investors should be practical about that and not worry about the ups and downs.
Andreoli, too, says that clients should count on their advisors when making sure their plan is solid.
“Have a conversation with your financial advisor and make sure that your assets are allocated appropriately among stocks, bonds and cash, based on your individual situation,” she says.
“Our team has consistently advised clients to invest for the long term and maintain liquidity for cash needs they have over the next one to two years,” she says. “I remind clients that this is why we’ve done all of our investment consulting and advanced planning work and now is the time to stick to the plan.”
Thompson says his firm is reminding clients, “The only way to capture the equity premium over the long term is to live through the temporary declines and stay in the market.
“We are ensuring clients are invested in actively managed funds, which takes advantage of the equities when there’s growth, and plays defense in a market decline,” he says.
Alexander says it comes down to: “Although emotionally challenging, in some cases, the best thing to do is nothing.”
5. Take advantage of the moment
Reinfried says that, like budgeting, making sure an estate plan is in order is something people aren’t always comfortable talking about. Now is a good time to give an estate plan some attention.
Making sure that an estate plan is in order includes not only making sure wills and beneficiaries on investment counts and insurance are up to date, but also make sure documents are in place, she says.
Even small life changes can make changes necessary. “We ask people to review their estate plans every five years,” she says.
Thompson says it’s also a good time to take advantage of the market decline and convert traditional IRAs to Roth IRAs.
In general, he adds, “Take advantage of this time and find an advisor you feel comfortable working with.”
This too shall pass
While it’s an unprecedented time, advisors say that their advice to clients hasn’t really changed.
“A significant part of our role in clients’ lives is to identify and manage risks to the greatest extent possible, even when the markets are moving in the right direction,” Andreoli says. “We can’t always see risks coming, but we can help clients prepare for volatility, whether it comes from a health or financial crisis.
Alexander says, “In many ways, the counsel that we provide during this crisis should not be meaningfully different than any other bear market and recession. Simply put, the principles of successful investing through inevitable market cycles has not been rendered obsolete due to the virus.
“Exercising professional humility and personal empathy are essential, especially during times of duress,” he adds.
Thompson’s firm is checking in with clients. “We are calling our clients, listening to them, and empathizing with them,” he says. “All of them are in different situations with this pandemic.”
Andreoli offers one last vital piece of advice: “To the extent possible, relax and enjoy your family and good health. This, too, shall pass.”
Reinfried says that those investing in the stock market are optimistic by nature.
“You have to believe in growth and that things are going to be better over time,” she says.
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