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In coronavirus economy, financial advisers telling clients these 3 key things

Tony Leal

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The recent market downturn and unprecedented volatility has worried many investors, regardless of their risk appetite.

According to a recent J.D. Power survey, 20 percent of Americans say the COVID-19 crisis has already severely hurt their financial situation, while 8 percent say it has "devastated" their finances. As millions of Americans struggle to adjust to a “new normal,” it is no surprise that many are checking on 401(k) balances, investments, and portfolios daily, if not hourly.

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During times like these, a financial plan can be more valuable than ever. Top advisers tell clients that one of the key pieces of advice for building a holistic financial plan is to “never put all of your eggs in one basket.” While this advice has always been around, most advisers today use sophisticated financial-planning software to guide clients on making it a reality and building a plan that can weather any market environment.

Here are three pieces of advice our advisers are sharing with clients to calm fears amid the current market climate.

1. Stick to your plan (especially if it's been stress-tested)

During times of uncertainty, it is easy to make impulsive investing decisions based on fear and panic. But the top financial advisors typically caution clients against making sudden portfolio shifts as a reaction to market volatility.

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It is no surprise that since early March, we have seen many clients checking in with their advisers to find out what the crisis means for their financial plans. Advisers have also been actively reaching out to clients amid the stock market swings and turbulence to answer questions and calm concerns.

In most cases, advisers are reassuring clients that no major change to their long-term plan is needed. (This is especially the case for investors with well-diversified portfolios who have had their retirement plans stress-tested against potential negative events outside of their control, such as a bear market environment.)

These conversations may be taking place virtually given the current federal and state social-distancing guidelines surrounding the pandemic, but the advice is as personal as ever. Advisers, for the most part, are reminding clients to focus on the long run.

The most robust financial plans are built with times like these in mind. Many clients have been relieved to hear that the recent market downturn and heavy volatility should have little to no effect over their long-term goals. This is why top-performing advisors customize risk in a portfolio according to each client’s unique goals.

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2. Where to put your next dollar

Whether it's their tax refund, stimulus check, or next paycheck, advisors are also helping clients figure out where to put any extra money in this environment. The first thing to consider is whether they are experiencing financial hardship, as more than 30 million Americans have filed for unemployment benefits since March 14, according to the Department of Labor.

For those who have been laid off or seen a reduction in working hours as a result of the crisis, advisors recommend putting any extra cash toward meeting basic needs. But for those still receiving a steady paycheck, it may make more sense to put extra money toward paying down high-interest credit card debt or building an emergency fund for those who don’t have one already. (According to GOBankingRates, around 25 percent of U.S. adults say they have no emergency savings at all, while more than 23 percent say they only have enough money to cover their bills for one to three weeks.)

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3. Borrow vs. spend?

Advisers are also fielding a good amount of questions about whether it makes more sense for clients to borrow in the current interest rate environment vs. liquidate any assets (stocks, etc.).

While current interest rates make it an attractive environment for borrowing, advisers take multiple factors into account when offering advice on this topic. Whatever your individual situation, this could be a topic worth discussing with your advisor.

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In addition to these three conversations, advisers are also reminding clients of an important history lesson: This is not the first time our economy has experienced a stock market crash or bear market environment. Better days are likely ahead.

Tony Leal is president of Envestnet MoneyGuide. Leal has been at Envestnet MoneyGuide since its inception in 1997. As president, Leal is focused on overall growth strategy, execution and operations. He also has technical and management responsibility for the development of the MoneyGuidePro® systems, enterprise customer satisfaction, and is the system architect for all integrations and customized versions of MoneyGuide products.

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