How to help your clients reset their retirement course… during COVID and beyond
by Ken CellaMr. Cella leads the Ken Cella leads Client Strategies Group (CSG) for Edward Jones. Visit www.edwardjones.com.
As COVID-19 has upended lives, it has highlighted the need for financial resilience – the ability to withstand or quickly recover from difficult situations. In my previous role as a financial advisor, I always tried to help my clients build their resiliency – and I saw that, for many, establishing that resiliency can be tough. It can be especially difficult in the wake of unforeseen challenges, and COVID-19 has certainly provided plenty of those.
The pandemic has knocked many people off course, particularly when it comes to retirement planning – a key element of financial resilience. In fact, 81 million Americans say COVID-19 has caused them to reconsider their retirement timing. And of those planning to retire, 35% are thinking about retiring later, mostly for financial reasons. In other words, a lot of people could use help building out their personal strategies for getting back on track.
There is some good news to report on this front. A recent study found nearly half of Americans (46%) say they are confident in their financial resiliency. For many, that confidence is strongly connected to having a financial strategy: almost 70% of Americans with a strategy feel financially resilient.
As financial advisors, we look to help our clients assess the impact of COVID-19 on their financial journey, help them understand what has changed and develop a strategy to emerge stronger from any setbacks. Whether clients have lost jobs or healthcare, begun supporting adult children or dipped into their retirement savings, COVID-19 has created challenging dynamics – and many of them will turn to financial advisors for guidance.
It’s at times like these when financial advisors need to not just provide sound financial advice, but to also be a source of support. Many clients have experienced hardship and loss; it’s important to emphasize empathy and sensitivity to what clients have been going through. Ask good questions, listen carefully and create a realistic strategy that will help get them back on track toward reaching their goals.
Demand For Professional Advice Surges
With all this in mind, it’s perhaps no surprise that demand for advice has been on the rise. In 2020 alone, 26% of Americans began working with a financial advisor for the first time. However, only a small percentage of Americans overall (16%) consult with a financial advisor. Instead, they lean primarily on significant others (26%) or family and friends (21%) for help when making financial decisions.
In parallel with this uptick in interest for professional advice, it appears that more Americans are interested in investing. Interestingly, about 1 in 10 Americans have either increased their investments in stocks and bonds (11%) or started investing for the first time (7%) since the pandemic began.
To be sure, these are promising trends. But as financial advisors, we can offer even more value to clients. Serving clients in a comprehensive way starts with understanding what’s most important to them. They aren’t just looking for financial help; they’re looking for help achieving an ideal balance in their quality of life. This goes well beyond what most financial advisors delivered a generation ago. We must adapt to those changes in order to continue fulfilling our purpose to improve the lives of our clients.
Financial Advisors Help Bring Confidence and Comfort
Helping clients through difficult times helps build loyalty for the long term. Take the time to listen, be empathetic, use technology like video calls to communicate when you can’t meet in person, and stay focused on helping solve clients’ problems in turbulent times. Taking these important steps can help clients feel informed, understood, secure and in control.
When you do these things, the benefits for the clients can be tremendous. More than 80% of people with a financial advisor said their relationship with their financial advisor gave them a greater sense of comfort about their finances during the pandemic. As they navigate the evolving COVID-19 landscape, we should also pay attention to the needs of different types of clients, with an eye toward helping them access the information and guidance they need.
In particular, women are less likely to have a financial advisor and also feel less financially resilient. That’s especially true now, as the COVID-19 pandemic continues to affect women severely and disproportionately. In fact, more than half of women aged 45-54 saw their financial security go down during the pandemic, compared with only about a third of men , according to the Edward Jones and Age Wave study An Update on America’s Physical, Mental and Financial Health. Women also accounted for almost 80% of U.S. adults who stopped working or looking for work in January 2021, and have lost a net 5.4 million jobs since February 2020.
This is another area where there is some correlation between being financially resilient and having a solid financial strategy in place. Just 39% of women surveyed in Edward Jones’ 2021 financial resilience study have a financial plan, compared to more than half of men . Men are also nearly twice as likely to consult a financial advisor. As a result of these and factors such as the gender pay gap, men report feeling more financially stable than women and more financially resilient. That has also impacted their retirement confidence. Just 41% of women say they are confident about retirement, compared with 56% of men (Source: Edward Jones and Age Wave, “An Update on America’s Physical, Mental and Financial Health”).
The pandemic has also impacted generations differently. While it has significantly reduced the financial security of a quarter of Americans, the younger generations have taken a bigger hit. Nearly one-third of Gen Z and Millennials characterize the impact as very or extremely negative, while only 16% of Boomers and 6% of the Silent Gen say they are affected to that degree.
Understanding these challenges and how they might impact our clients different are key for us to provide sound and helpful advice.
Retirement Challenges Grow
Retirement planning continues to be an area where financial advisors can be most helpful, given that many Americans were already at a disadvantage when COVID-19 struck. Just a quarter of working Americans were on track with their retirement savings, even among those in their 50s who are closer to retirement.
Not surprisingly, those planning to retire are feeling less confident about it these days, with only 46% being confident about what they’re saving for retirement, while 58% were confident prior to the pandemic. At the same time, 20 million Americans have stopped making regular retirement savings contributions during the pandemic.
Finally, the pandemic and its impact on younger people may also be straining the finances of older people. Twenty-four million Americans have provided financial support to adult children due to the COVID-19 pandemic, and 71% of retirees are willing to provide financial support even if it jeopardizes their own financial future. Given the fraught emotions of COVID-19, many (if not most) people are feeling a great deal of stress. By being aware of changes in clients’ physical, emotional and psychological well-being, financial advisors can address the whole person and work with changing family dynamics.
By practicing empathy and fostering good communication with clients, we can help them develop and follow a financial strategy, prepare for the unexpected and build the financial stability and resilience they need. In challenging times, financial advisors can bring the knowledge, experience and assurance people crave and help them build their financial resilience.