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Financial Advisors Allay Fears of Clients Unnerved By Pandemic

·5 min read

Even before the economic uncertainties of the pandemic, many Americans faced the grim reality of an underfunded retirement.

The pandemic and ensuing economic recession only exacerbated that situation. In addition to job losses, furloughs or early retirements, the crisis also brought about mental shifts in how Americans perceive their finances.

To gauge sentiments, personal finance technology company SimplyWise polled 1,029 Americans ages 18 and over from Jan. 8 - 10, for its bimonthly SimplyWise Retirement Confidence Index. Among its findings, 71% of workers now plan to continue to work in retirement.

"The very real financial anxiety that most Americans feel now, is important both for public awareness as well as future policymaking," says SimplyWise CEO Sam Abbas. "We started the SimplyWise Retirement Confidence Index during the pandemic because we recognized that in these uncertain times, sentiment around savings and Social Security is changing fast."

The most recent report found:

-- Nearly a quarter of Americans don't have any kind of retirement plan.

-- Slightly less than half of Americans (44%) worry they'll never be able to retire.

-- More than one fifth of those their 60s are now planning to postpone their retirement.

-- Around a quarter of those in their 60s could not last more than three months off their savings.

-- 21% of 401(k) account owners are planning to withdraw early.

For financial advisors, these findings may manifest themselves in clients who are viewing plans quite differently from just a year ago. Clients may become panicked by news events or even developments in their own lives.

Financial advisors are accustomed to steering clients toward the best decisions in any given situation. That sometimes means dissuading clients from potentially harmful financial moves. The human element nearly always takes precedence over number crunching.

"Education is important, but the first step is to be empathetic and make an emotional connection," says Sam Brownell, founder of Stratus Wealth Advisors in Kensington, Maryland.

"In many stress or anxiety-inducing situations, clients want to be heard, not lectured to," he says. "Sometimes, the best advice for us as advisors is to put aside our need to give advice and practice good listening. In my experience, once a client feels heard and is able to talk about what is causing their stress, it is easier to have a conversation focused on the facts that matter to their specific situation."

[READ: MBA or CFA: Which Is Better for Financial Advisors?]

Keeping Current Events in Context

Keeping the pandemic and other unusual events from last year in context is key, says Scott Schleicher, financial planning specialist group manager and senior financial advisor at Personal Capital in Denver.

"We need to remind clients that the economy, the nation and the world have faced extremely serious challenges in the past," Schleicher says. "That's not to say that today's challenges are minor. Rather, it shows us that panicking is the worst thing we could have done in the past, and that's probably true again today. The investors who were truly hurt during past downturns are the ones who panicked and did not stick to their long-term financial plans."

Due to the pandemic, financial advisors say some of their clients plan to work beyond a previously planned retirement date. Some hope to remain in their jobs, while others are taking on consulting or freelance projects or entering another line of work altogether.

"Many more clients are planning to work in retirement," says Nick Cantrell, founder and wealth advisor at Green Future Wealth Management in Worcester, Massachusetts.

"The majority of our clients now have three timeframes: working years, transitional years and retirement years," he says.

This approach, he says, gives clients more "play money" during the transitional years, and that this type of planning early on to allow clients to crystallize a vision for what their transitional years look like.

"I have also found that the clients that have a gradual transition to retirement are those who feel most comfortable with the lifestyle and identity changes that accompany retirement," Cantrell adds.

Roger Hewins, founder and president at Team Hewins, an independent wealth management firm in Redwood City, California, says a later retirement date, even if forced by the pandemic and economic downturn, makes sense for many.

"A lot of people in America have not saved and invested enough to retire at age 65. The statistics are clear on that point," he says. "Maybe this is just a trigger that caused people to acknowledge that reality."

The traditional retirement age no longer makes sense, he adds. Hewins counsels clients to consider the risk of a "longer than expected" lifespan. Longevity is a risk for retirees who may run out of money if they haven't planned properly.

[Read: One-Stop Shop: Should Financial Advisors Offer a Wider Range of Services?]

Be Aware of Emotion-Driven Decisions

Gerald Grant III, retirement planning specialist at Equitable Advisors in Miami, says pandemic worries and news stories are taking a toll on Americans.

"Emotions and misleading information can lead to making very poor financial decisions," Grant says, who encourages his clients to leverage his firm as a resource if they have concerns about anything about their finances.

"We are able to filter some of the information to give them an unbiased interpretation of what's actually going on," he says.

He also reminds clients of their goals and the recommendations in their financial plans. Overall, he says, it's important to keep the current situation in perspective.

"This isn't the first economic downturn, and it won't be the last," he says. "One bad financial decision can cost someone years' worth of returns, which can have an enormous impact on their retirement and long-term goals."