Feeling Paralyzed Lately? We’re Here for Your Financial Peace of Mind

Key Takeaways  

• Peace of mind comes from having well-structured financial plans that withstand market volatility without lifestyle changes. 

• Skilled financial advisors provide personalized recommendations and behavioral coaching that prevent you from derailing your plan during volatile times. 

• During high market volatility, proper financial planning includes tax-loss harvesting, cash flow management, and portfolio allocation review. 

With all the uncertainty around the markets, tariffs, and the economy, lately, we would normally be getting lots of calls from prospective clients seeking advice. But this time around, despite all the volatility and uncertainty, it’s been surprisingly quiet. Sure, we’ve been on the phone reassuring and advising our clients, but the last time we had a dearth of client inquiries during a time of chaos was during the Great Recession of 2008-2009 when everyone was essentially frozen. 

I’m not saying the current tariff-driven upheaval we’ve seen recently will be as dire as the Great Recession, but the changes have come on so swiftly and so drastically that folks may still be in a state of shock.   

It’s easy to feel paralyzed with indecision when it seems like so many things are beyond your control. But at times like these, when the markets have quickly gone into a correction phase (down more than 10% from their recent high), there are more things within your control than you might think. For instance, tax-loss harvesting, which allows you to sell some stocks or other assets for a loss to offset some of the healthy gains you’ve had in recent years.   

As our clients know, it’s also a good time to set up (or review) your cash flow plan. This review can reassure you that you’re not so heavily dependent on the daily swings of the stock market. If you are properly allocated, you would likely be taking distributions from your bonds while the stocks are depressed.  It’s also a good time to review your retirement plan   so you know which type of adjustments you may need to make depending upon your changing life circumstances. If you don’t have a tax plan yet, this is a good time to look at strategies for making tax-efficient changes to your retirement plan and cash flow plan. As mentioned in other posts, it may be a good time to perform a Roth conversion.

Confidence does not come from listening to opposing views from the talking heads on TV. It comes from knowing how your personal situation will sustain itself under different outcomes. 

When you encounter a major life event such as an inheritance, business succession, death of a spouse or retirement, those are times when you can really benefit from having a financial advisor. But many people only think of their financial advisor as the person to go to when they need to invest some money. For the majority of people working in the financial services business, that may be true. You’ll notice I hesitate to call those investment facilitators “professionals” because I don't think someone that buys and sells investments on commission, or who recommends pre-made “age appropriate” investment allocations, is a professional. A true professional financial advisor can provide highly personalized recommendations for solving your financial puzzle that give you peace of mind.  

Real-World Example  

An elderly woman and her 50-something daughter were in my office the other day. They were highly intelligent, but when I started going over the mom’s portfolio, the daughter just said: “Mom, don’t even look at it. It’s not going to help you sleep.”   

I know the headlines are overwhelmingly negative right now and most portfolios are down from where they started the year. But ignoring what’s happening to your portfolio is not a solution. I told them: “We’re going to sit down and have a conversation. We’re going to make some projections on what things would look like for you if you were down another 15% for two or three more years.” I told them that our firm can run many different scenarios to see how a continued bear market would impact their personal well-being. “What adjustments would you need to make?” I asked. “Is it serious enough that you have to cut spending or delay a purchase?” I continued as they nodded in agreement.   

It’s very important to get those conversations out into the open. If you’re single, who are you having those conversations with? If you’re a couple, are you and your partner in sync when it comes to your finances? More often than not, couples have very different relationships with money and those conflicts can affect the other parts of their relationship. Wouldn't it be nice to have an objective third party -- a professional -- help you work through those differences without bias? If you have fixed and known big ticket purchases coming up, how are you planning for them? Is the current stock market correction going to affect those plans?   

I know some of you are concerned about the cost of using a financial advisor. Well, Vanguard’s annual Advisor Alpha study consistently shows that working with a skilled financial advisor can add 3% annually to your net returns, with two-thirds of that added boost attributed to behavioral coaching. That’s what prevents from engaging in destructive behaviors that erode your wealth and derail your plan. How much is that worth to you?   

As DALBAR’s famous annual study shows, individual investors are their own worst enemy, consistently underperforming the indexes they track. Why? Because they can’t help themselves from getting into and out of the market at the wrong times. Meanwhile, if you're telling your advisor you want to go to all cash until the markets settle down -- and they allow you to do it – then it might be time to look for a new advisor. Your professional should be taking the steps above to show you how jumping into and out of your portfolio will likely do more harm than good.  

At the start of the Great Recession, when stocks plummeted 50%, we had a prospective client who made some poor choices based on what they believed would be prudent. As we got to what turned out to be the bottom of the market, the person sold their stocks and purchased Treasurys, which were at a very high level due to the “flight to quality” during that scary time. Ultimately, this person was hit twice because as the bad news settled, so did the inflated prices for Treasurys. Finally, he picked up the phone and called us and we eventually got him straightened out. Now he has all of his plans in place. He’s extremely confident about his finances and finally has peace of mind.   

Conclusion 

Your peace of mind comes from controlling your own personal destiny and situation. Our clients can do that. In addition, Novi clients have not had to change their lifestyle through any of the market corrections or high volatility periods we’ve endured because they have the right plans in place. If you or someone close to you has concerns about your asset allocation or retirement readiness, contact us any time to discuss. We’re happy to help. 

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 ROBERT B. DUNN, CFP® is the President and Managing Partner of Novi Wealth