7 Ways Wealth Managers Can Lead You Through COVID Recession

During a recession, if you have a financial advisor or wealth manager, should you keep them? Should you look for a new one? What should you be able to expect from a wealth manager during the COVID Recession?

At the very minimum, you ought to expect your wealth manager be there for you, now more than ever. If you call your wealth manager or financial advisor and can’t get a hold of them, and they never respond to email, that’s an indication you should look for a new one. An advisor you can count on ought to be even more available during a recession. Now is when you need them the most, and they should know it.

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Here are seven other ways a wealth manager can help lead you through the COVID Recession, and whichever one comes after it, as it surely will.

1. Be the Steady Hand and Voice of Reason

It’s hard enough to know how to manage your finances as a high net worth or ultra-high net worth investor during normal times. As you’ll see in this article, you have some tough decisions to make because of the COVID Recession. But some of these decisions also need attention during normal times, and making them on your own or just based on what a friend or other relative tells you doesn’t usually turn out very well.

But now, the pressure is on. You might be losing money. You might be losing a lot of money. Your debt situation looks different than it did before. If you own income-generating real estate, that steady source of income now looks a bit more tenuous. If you own a business, its status has almost certainly altered from where it was.

Many of the most fundamental components and assumptions underlying your portfolio and wealth management plan are now less certain. As you watch long-established companies going bankrupt, one by one, the instinct to panic and make rash decisions gets a little bit stronger.

An experienced, data-driven wealth manager can help you stay calm and keep your perspective focused on where it should be – on the long view. What we do now matters, but what we want to do decades from now matters more. You are building a lifetime of wealth permanence. A couple bad years will happen now and then. Your wealth manager should be able to help you remain confident, secure, and stable.

2. How to Respond to Financial Losses

Are your investments losing money? There’s a good chance they are, although as is typical during times of financial upheaval, the tides are rising and falling by the week. One week it’s down 20%; the next it’s back up 15%. And some are losing far, far less than others.

This chaos is the very reason to look to your financial advisor for how to respond. Too many people make irrational decisions based on a lack of knowledge and experience during market gyrations and recessions.

They do things like selling stocks and funds that have gone way down. This just seals your losses. Or they dramatically alter their asset allocations, sometimes even pulling out of the market altogether.

Millennials in particular, who still have a bitter taste from the Great Recession of 2008, had a tough time re-entering the stock market. Those who waited too long missed out on huge gains, especially in the early parts of the 2010 decade, but continuing all the way into 2019.

If you’re wondering how to respond to financial losses, stop wondering. Go ask an experienced wealth manager who has a time-tested process for managing high net worth portfolios through all sorts of market conditions.

3. Watch Out for Tax Policy Changes

Recessions are one of those rare moments when Congress sometimes does something. Unfortunately, that’s not always a good thing. In the COVID Recession, they have already given away $3 trillion, with more possibly to follow.

Especially with a presidential election looming, it is not at all unlikely that some big changes in tax policy could be coming. Some tax policy changes benefit ultra-high net worth investors, and others can cause us harm.

You need a wealth manager who keeps you apprised of these changes, but more than that, one who also quickly advises you on how to respond to them. For beneficial tax changes, you want to know how to take advantage of them. For harmful changes, you want to know how to avoid or minimize the damage.

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4. Updating Your Estate Plan

It’s never easy to bring up the possibility of death. But one thing COVID has proven is that it isn’t something to be taken lightly – especially for people over 60 and those with compromised health conditions.

If you have retired parents, now is the time to make sure their estate plan is updated and optimized to benefit the rest of the family. If you are retired, then you must make sure your heirs are set up in the best possible way.

Pillar Wealth Management has been part of numerous estate planning teams, partnering with lawyers, accountants, and other specialists working together to create the best possible set of outcomes for the heirs of high net worth and ultra-high net worth families.

Estate planning involves much more than just deciding how much to give to your heirs and what to leave to charity. It involves insurance, estate tax minimization, real estate and hard assets, trusts, account access, scenarios that vary depending on the age of the person when they die, and so much more.

The kind of wealth manager who is best for you is someone who keeps a constant eye on this. When your life situation changes in any way that might affect your estate plan, they initiate contact with you and talk through any new decisions you need to make.

Life is fragile, even for our ultra-high net worth friends. Work with a wealth manager who will help keep your estate plan current.

5. Helps You Avoid the Higher Risk of Poor Choices

You likely do need to make some adjustments to your portfolio and your financial plan because of the COVID Recession. A wealth manager, even more than a financial advisor, should have a clear and specific process for how to systematically fine-tune each customized investment plan for all their affluent clients.

Pillar Wealth Management uses a time-tested process for adjusting our clients’ investment plans.

We have identified the five areas within your control that are measurable, adjustable, and can be injected into your plan. Those are:

• What you spend
• What you save
• Major planned expenses
• What you leave to heirs
• Risk tolerance

Here is where many high net worth investors are at great risk of making poor choices during a recession or some other type of high-stress financial scenario.

Some take on more debt when they should be reducing it, by plowing ahead with a major expense that could be delayed. Others refuse to cut spending. Others go the wrong way on risk tolerance, or keep it the same when it needs to be adjusted.

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Very few wealth managers or financial advisors have devised a way to mathematically incorporate these five variables into their clients’ investment plans.

We have. And we cannot stress enough that going the wrong way during a time like this recession can lead you to miss out on huge gains in the coming years. An experienced wealth manager with a time-tested process can help steer you away from poor choices during an economic downturn like the COVID Recession.

6. Uses Historical Data from Other Recessions

Here is where some wealth managers differentiate themselves from others. In theory, everyone has access to the same data from history. We can look at past recessions, like 2008, 2000, 1991, and many others further back. We can look at crashes like Black Monday, inflationary periods, wars, and even the Great Depression.

In theory, every wealth manager can look at this data.

And one lesson everyone can take from this is that recessions do eventually end. A good wealth manager will use the data from history to show you that you will weather this storm.

But there is much more you can do with historical data than just reassure a jittery client. Where Pillar Wealth Management separates from most is in how we use historical data to help our high net worth clients avoid the worst consequences that befall most other investors during a recession such as COVID. How are we different from most in how we use historical data? Here are a couple ways:

We use almost 100 years of data

Many wealth managers who use any historical data at all use just 20, 30, or 40 years. The difference is vast. Going back just 40 years excludes major historical events such as the Vietnam War, inflation from the 1970s, World War 2, the Korean War, and the Great Depression. Without that data, a wealth manager cannot provide as much clarity or depth if they attempt the next process:

Test your portfolio against history

We can see how your investment plan would have performed during past recessions and other periods of upheaval, including times of booming growth. But if we only go back 40 years, you won’t know how you would have done during the Great Depression or the Vietnam War, for instance.

Every historical event affects the economy differently. So the fewer events included in an analysis, the narrower picture you have of your portfolio’s strength and vulnerability.

As a result, you have less security, less assurance, and more uncertainty.

7. Build Historical Data into Your Plan (You Can’t Do Without this One!)

The previous discussion is important, but all of that is still like high school compared to this next one. Every wealth manager should be using at the almost 100 years of data, even though they aren’t. That’s basic. This next one is like upper level graduate school at the best university in the world compared to that.

The problem with stopping at just using historical data is that you are still left hoping you can simply get through the next recession. But Pillar Wealth Management has developed a whole additional level of analysis and projection. We know recessions will come. So we have worked out a way to build that knowledge into your plan.

We aren’t just expecting recessions to come. We are counting on it.

We have created 1000 hypothetical market scenarios, like simulations, extrapolated from the 100 years of historical data. So, in addition to running your portfolio through historical data, we will also run it through 1000 additional scenarios and see how you would perform.

Will you still be able to retire when you want? Will you have as much left at the end of your life as you want? Will you be able to take that year-long excursion you’ve been planning? Can you start your next business? Start a foundation? Become a major political donor?

All of these and countless other goals should occupy center stage at the heart of your financial plan. And by running your portfolio through these 1000 ‘what if’ scenarios, we can see if you will still achieve all your goals and dreams.

If your plan passes the test in 750 to 900 of these simulations, we have determined that you can pretty much count on everything going the way you want it to, financially speaking, regardless of recessions.

This is why we like to say you can practically ignore recessions.

Can other wealth managers say that with this much certainty?

See How You Can Get through a Recession Free from Anxiety and Panic

Schedule a free chat with CEO and Co-Founder Hutch Ashoo