'People need us for a variety of reasons ...'
The importance of adequate reserves: We have a global pandemic that turned into a global financial crisis, and no one can be fully prepared for that, but it's shown that helping clients prepare for the future is very important. We encourage our clients to have some emergency funds on hand. In the climate we've experienced this past year, cash flow, or the lack thereof, was critical whether it was for an individual or a business. It's amazing how many businesses were in crisis mode within just a few weeks after this all began. There's no total protection against that, but we can help clients try to maintain adequate reserves.
Guiding clients through market volatility: We get a lot of questions in times like these, but the main conversations we've had revolved around the volatility of the markets over this past year. Clients came to us asking what's going on and why, and what they should do. We told people, "Don't do anything if what you owned was invested in a way that met your goals, your risk tolerance, and the needs of where you're going." We try to prepare in advance for bad events, and this was a bad one. On the flip side, we have opportunistic clients. They saw things drop and wanted to buy low, and we helped them invest at a great time. It really is about understanding client behavior and psychology.
Helping clients in the post-pandemic economy: We tell our clients not to be frozen by fear as we recover from the pandemic's impact. Fear is obvious in bad times, but in good times the "fear of missing out" occurs, and people chase returns and can make poor decisions. We tell our clients that not making a decision is actually making a decision. They need to know their finances. A lot of people just don't know how much they have in savings, or in their 401(k), and whether they can access all of it. They may not understand whether their insurance is adequate or if they have the proper estate documents for their family. And finally, we tell them it's important to "know thyself" and, from there, to be a little more aggressive or conservative.
Is the digital transformation a threat to personal financial planners? I do hear from people who ask why they need an adviser. Sometimes it's about the wisdom or knowledge an adviser brings to the table. It also gives people time. There may be things people can do themselves with online tools now, but it would take time. Some just don't want to do it — they want to travel or see their grandkids. Last, and maybe most important, we are not them. Any client, by definition, cannot be objective about their own financial life because it is their life. They are too close to it and too personal and emotional. People need us for a variety of reasons, and they definitely need us for that last reason.
Gerald Townsend, CPA/PFS/ABV, is president of Townsend Asset Management in Raleigh, N.C.
Favorite books: The Lord of the Rings.
Favorite technology or app: One of my hobbies is studying Chinese, and I use a Chinese language app called Hanping.
Favorite travel item: Other than making sure Google Maps is working OK, I always bring a hand/grip exerciser when I travel.
— As told to Lea Hart, a freelance writer based in Virginia. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, the JofA's editorial director, at Kenneth.Tysiac@aicpa-cima.com.