by David Quinn
Since we started Investwise in 2006, we have focused on long term planning. During the 2008 financial crisis, I learned more in 12 months than I had in the previous 12 years working in the investment industry. I made sure to put those lessons into practice and ensure clients were well prepared for the next crash. I feel most advisors have clients in lower risk portfolios than they should be in due to fear of the unknown.
Voyant allows us to graphically represent the future in a format that the client can digest and eliminate this fear. Like most good financial planning firms, our goal is setting a firm foundation for future financial decisions. We know a plan can never be fully accurate, but it will act as an anchor when change occurs and important decisions are required.
Our clients want peace of mind, and giving them worst case scenarios in our review meetings sometimes helps put them at ease. Over the past 3 years I have found myself starting to bring loss capacity and market crash implications into my review conversations. This analysis also allows us to test our clients risk appetite, before it gets critically important. We use some real data to model the market crash scenarios, hopefully showing our clients that the plan still works and there is no need for change. If this analysis leads to major client concerns, we can adapt the plan accordingly. We certainly want to avoid making changes to the plan after a market correction!
I've found these simulations particularly pertinent today. Any advisor worth their salt has known that stock markets were starting to look over-valued during 2019. In advance of the market crash, we ran through simulations with our clients, illustrating a potentially significant market correction, and how it might impact their financial plans. Both AdviserGo and Voyant Adviser have perfect tools for running through these scenarios.
Every market correction is different, with longer or shorter recovery periods, but a robust financial plan should be able to weather these storms, preventing clients from or making rash decisions such as selling all their equities. Likewise, we have had quite a few requests from clients with large cash reserves to move into the markets now that there appears to be better value. We've reminded them why they hold cash in the first place. They may need the cash for short term projects, or have enough invested already to meet their long-term needs. These large market movements create confusion and unrest for everyone, and it is at times like these that good financial planners really earn their corn!
Now that we are actually living through a significant market correction, I can't emphasise enough the value of a client already understanding the implications of a crash, before it happens! Most of our clients already knew the implications and impact of this current crisis. It's still painful, but for the most part, our clients remain calm.
We have brought forward a lot of our plan reviews this month, in order to get in front of as many clients as possible. The forced social distancing has actually made this much more efficient as we can hold more meetings on Zoom than we could ever hold in the office. This is the big difference between 2008 and 2020 market crashes. We can get in front of a lot more clients quickly now, sharing screens and giving some good advice!
We have been a Voyant subscriber since the very early days in Ireland. As a fee-based planning firm, we hold Voyant central to our process and our business has evolved in line with the software evolution. The fact that our clients place such value in the visual representation of their future financial situation is central to our business. It makes conversations about lifetime goals and objectives so much easier.
All we want to do is give some reassurance to our clients, showing them their financial plans under these new circumstances. Hopefully most are still on track. For those that aren't on track, Voyant will be a key part of our process to help them find solutions.
Dave Quinn is Managing Director of Investwise Financial Planning, a fee-based financial planning firm based in Dublin City Centre, Ireland.
