We’re never more insightful about money than after we’ve lived through the kind of shocks that were so plentiful in 2020.
So now’s an ideal time to tap into the mind of financial planners and advisers to see how the lessons of last year will play out in the advice they provide to clients in the future. I recently asked planners and advisers the following question on LinkedIn: “After a year of unprecedented financial ups and downs, what is your No. 1 piece of advice for clients in 2021?”
The most helpful of the responses I received are presented thematically below, with light edits.
On how to be less stressed about your finances
“Give yourself a break – 2020 was a traumatic year,” Julia Chung, a B.C.-based certified financial planner, or CFP, with Spring Financial Planning, wrote in her response. “Take a breath, and think mindfully about your next steps. You’re not missing out on anything, so you don’t need to rush. Design your finances around the way you, specifically, want to live. "
“Having a financial plan in 2020 would not have saved your job, or prevented you or a loved one from getting the virus,” wrote Mehul Gandhi, a CFP with Westmount Wealth Planning in Surrey, B.C. “But it would have provided some peace of mind. My advice is to have some kind of plan, whether that’s accomplished by working with a planner or creating a basic one yourself with help from online resources. It will provide you with direction and some confidence to cope during difficult times.”
“You are where you are, and where you are is okay,” wrote Meghan Chomut, a CFP in Thunder Bay. “There’s no room for shame or money guilt in 2021. Start with your next right step, instead of trying to leap to meet unrealistic expectations.”
On being worried about your investments
“Twenty-four months ago, the topic of investors’ biggest concern was the China-U.S. trade war,” wrote Anna Premyslova, an investment adviser at CWB McLean & Partners Wealth Management in Calgary. “Eighteen months ago, it was Brexit; four months ago, it was the U.S. election. How distant do these things feel now? COVID, too, will eventually pass, but you and your portfolio will continue to ride the peaks and valleys of macroeconomic events for years and decades to come. Set your course on a ‘true north’ that gives you equal peace of mind on the best and worst days of the market, then stick to it.”
On balancing debt repayment and saving/investing
“You may have taken on more debt than you are comfortable with, but try to prioritize building up depleted savings,” said Tom Yeo, a personal financial planner, or PFP, in Spruce Grove, Alta. “As long as you are able to make minimum payments to the debt, try to save at least a little bit for the short term. The financial cushion is more useful for your peace of mind than a slightly lower debt load.”
On the importance of emergency funds
“If you lose your job in February, 2021, are you positioned to get through the next six months?” wrote Kurt Rosentreter, CFP and chartered accountant. “2020 may have been the easier of the two years, financially speaking.”
On what to expect from your investments
“Given the historically low interest rate environment and market uncertainty, investors should expect a rate of return between 4 to 5 per cent after fees for a well-balanced portfolio with 60 per cent equities, 40 per cent fixed income,” said Paul Shelestowsky, a CFP and senior wealth adviser at Meridian Credit Union.
“Be very wary of today’s downside risks,” wrote Thane Stenner of Canaccord Genuity Wealth Management in Vancouver. “This is a very overly enthusiastic market currently. More downside than upside in my opinion.”
“Making it through 2020 shows you have staying power,” wrote Hervin Pesa, a Calgary-based CFP. “Remember it next time you see a dip in your portfolio or a change in circumstance. You’ve made it through tough times before, you’ll do it again.”
On the anti-bond sentiment common these days
“Bonds are an asset class that everybody loves to hate right now,” wrote Richard Morin, chief executive officer at Archer Wealth Management In Montreal. “Unsurprisingly, a growing number of opportunistic firms are proposing newfangled alternatives to bonds like cryptocurrencies and liquid alts. Others push old-fangled alternatives, like gold. Whether these products – with their high fees and/or patchy track record – belong in the portfolio of even sophisticated investors is debatable. One thing is clear, however. They have no demonstrated history of protecting capital in bear markets, which is what most, if not all investors need. The history of the past 100 years teaches us that bonds are the only financial asset class to offer protection in bear markets.”
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