To save or not to save? - That is the question
by on 26·10·2021
Well, 2020 has not been the year that anyone had predicted – with the storms, floods, fires, virus pandemic and the odd plague of locusts, some could argue that the End of the World is nigh. To say 2020 has been difficult is an understatement.
However, the aftermath of these natural disasters will be unprecedented and challenge what we perceive as normal – economically, politically, socially and financially.
So what impact will that have on financial services in general, what impact will it have on the adviser, what impact will have it have on the client/adviser relationship, what impact will it have on the client directly? So many unknown variables now – the use of a crystal ball is becoming more credible.
In my opinion, I think all these elements are going to be affected both individually and integrally. With the markets fluctuating, the imposing threat of recession and the aftermath of Brexit, advisers will need to be more mindful of their clients’ investments and be prepared to adjust more proactively. Therefore, the emphasis on the importance of regular reviews and increased communication with clients becoming a hot topic.
The effect on the clients I think is going to be an interesting one, with bigger swings between the risk averse and the more adventurous attitudes towards the retention of wealth. One thing a sharp shock of your own mortality does, which COVID-19 has prompted for many, is to make a client re-evaluate their views on what they are saving and investing for? Is it worth saving for that ever-eternal rainy day or live in the now and make memories with what they have or is it a question of a balance of both?
This is where the client/adviser relationship can be strengthened and challenged at the same time – it puts emphasis on ensuring that the client’s objectives are fully understood and documented and to challenge if these have been changed because of the effect of this pandemic.
Some might want to hunker on down and preserve as much as possible and save more for the ‘just in case’ so the focus will be on safer portfolios and higher reserves in emergency funds. This is one thing that has come out of the pandemic, particularly for those in the more effected industries such as retail, hospitality and the arts, that the emergency funds being recommended to be retained should be more than just 3-6 months’ worth of expenditure, with the reality being nearer to holding 9 months to a year.
On the flipside though – over 45,000 people have unpredictably lost their lives suddenly due to COVID-19 in the UK alone and over 500,000 globally in a very short time frame. If you could ask any of these dearly departed people from the other side a question such as ‘What regrets do they have?’ and ‘Was there anything they wanted to achieve before their time was up?’ then I am sure over 80% would have an answer which would involve money whether it is to take that trip to another country to see a loved one they kept putting off, or take a trip of a lifetime to see a favoured city or landmark, to help out a family member in need, put aside funds for a child’s education, donate to charity or even to just to blow some of it on something completely frivolous like an Aston Martin or a diamond tiara….. Whatever their story, there is sure to be a level of regret of not doing something before their death and this is where the balance of saving versus splurging is a vital balance and a focus for the adviser to help those still this side of the Pearly Gates to achieve their goals.
Interestingly, according to the Financial Planning Today website article published on 7th October 2020, 27% of advisers taking part in a Personal Finance Society (PFS) poll confirmed that their clients had reduced the amount that they are saving and spending due to concerns over the COVID Pandemic, Yet conversely, 29% of advisers confirmed that their clients were saving more cash. These statistics prove that minor shifts in attitudes are beginning to filter through but overall, it shows that most advisers and their clients are sticking with their original financial plans with minimal disruptions. However, with the end of the furlough scheme in sight and the regular announcements of big company redundancies occurring most days, it would be a more telling statistic to ask the same poll in December and see how the next 3 months impact on client views.
Keith Richards, Chief Executive of the PFS, confirmed that:
“We still find ourselves very much in the midst of this pandemic, with more financial impacts to come for many individuals. This month spells the end of the government’s furlough scheme, which has already resulted in businesses consulting on redundancies and some will struggle to survive until Christmas.
“While we welcomed the Chancellor’s Winter package and the measures to protect viable jobs, many economists agree they have not come soon enough, nor do they go far enough to protect the many millions who will be hurting now. Unfortunately, this means we can only expect personal finances to be hit harder and for unemployment to continue to increase.
“The value of professional financial advice could not be overestimated during this period, nor in the months ahead. The financial situation of many could be bleak in the months to come and we have already alerted the FCA and The Pensions Regulator to a spike in requests for pension transfer advice.
“We have also urged members to remain vigilant and continue to reach out to clients to ensure they are swiftly updated on any change in financial circumstances so they can help them throughout this crisis.”
This is where The Timebank can assist an adviser in helping strengthen these client relationships by freeing up valuable time that can be spent giving their clients an extra financial cuddle. The Timebank can help in administering many of the mundane time-consuming tasks that an IFA needs to do such as preparing reports, gathering data, doing research, assisting with CIPs, due diligence on providers, administering and updating records on back-office systems and variety of other functions – the list is endless as we will always endeavour to help in whatever capacity we can.
If you would like to discuss what The Timebank can do for you, then please feel free to give us a call on 01432 355322 or visit our new website www.thetimebank.co.uk for a taste of what we can offer.