Smith and Pinching’s Carl Lamb looks at clients’ changing priorities as lockdown eases and urges all advisers to be kind as plans evolve and change in light of ever-shifting circumstances
Can you believe that we are already over half-way through the year? It's certainly been a challenging few months for everyone, irrespective of their wealth, employment status and personal circumstances.
As financial advisers, we are often the confidantes of our clients who will be responding to the easing of lockdown in a variety of ways. Our conversations with clients now will be more important than ever.
I'm still seeing a great deal of nervousness about both health and wealth. Many clients - especially the over 70s - are very reluctant to get back to normal. They're still staying at home, they are adamant that holidays overseas are off the agenda and, as a result, their spending patterns have changed dramatically. When we review income and expenditure, there are new conversations to be had about what retirement income will be needed in the short term, for example.
Clients have found a heightened awareness of their own mortality too at every age. It's stimulating more focused conversations about life insurance and income protection.
Life was certainly put on hold during lockdown and business decisions have been put on the backburner until directors and owners can feel confident that their businesses will survive the recession that is being widely predicted. Any available financial resources are being shelved in case they're needed just to survive. Business planning has had to be revisited and a range of scenarios discussed.
Families have been under a lot of pressure, with enforced unbroken family time being sometimes a blessing but sometimes a curse. Lockdown has exposed relationship cracks in a way that has never been seen before. Much like the traditional impact of the prolonged festive break over Christmas and the New Year, divorce lawyers are likely to see a rush of people to their doors.
Calling it quits
It's good to see that the ‘no fault divorce' legislation has finally been given Royal Assent and is effectively now law. However, lawyers are warning that it will be some months before the legal system is ready to take petitions based on the new law and it may well be autumn 2021 before the first divorces are awarded on that basis. In essence, the legislation removes the need to assign blame - such as with adultery or unreasonable behaviour - to one party in the divorce.
The separation elements of the old rules have also been removed - two years if both partners consent or five years if one doesn't - and all that is required under the new rules is for at least one of the couple to be able to demonstrate that the marriage has irretrievably broken down.
One key element of the legislation is that couples must wait six months between the lodging of a petition and the divorce being made final.
Financial planning for those going through this process will remain an important element, with pension valuations and sharing decisions critical.
Another outcome of lockdown has been the impact on those approaching retirement. We're seeing polar opposite reactions: some clients have hated long empty days and have become determined to keep on working for as long as possible while others have embraced the quieter life and are seriously considering slowing down earlier than originally planned. In both cases, retirement planning is going to be essential, ideally using cashflow modelling to demonstrate the impact of changes to their original retirement timeline.
For financial advisers, all of these pressures mean that we must take additional care to respond to underlying issues with our clients. I never advocate tiptoeing around sensitive subjects - I've a reputation for being frank and not dodging difficult issues - but we do need to have our radar on high alert for changes in clients' feelings, relationships and needs and for new vulnerabilities.
What we mustn't do is pile on the pressure, so we must be patient if it looks like their circumstances may be undergoing fundamental change.
However, our role is crucial on these occasions: clients will need to understand every aspect of their options. We must listen, point out the implications of different ways forward, put meat on the financial calculations and, once a decision is made, readjust financial plans as needed.
Our profession has been able to carry on more or less uninterrupted during lockdown and clients have been hugely supportive of the changes that have had to be made to our interactions with them. It's our turn now to support our clients as they emerge from lockdown with professionalism, flexibility and, above all, kindness.
Carl Lamb is a Chartered financial planner and director at Smith & Pinching
Relationship is 'preliminary due diligence'
New equity release initiatives
Admits past failings
Full-Service Value Assessments
Openwork survey of advisers