Staying the Course

by Matt Cosentino | Apr 4, 2021
Staying the Course

Managing wealth during the pandemic can be difficult, but financial experts advise clients to think rationally and not let emotions affect their decisions.

The term “unprecedented times” has been thrown around often in reference to the COVID-19 pandemic. As it relates to the economic crisis that struck early last year as a result of the coronavirus, and which the United States continues to fight its way through, it is true that we are facing unique circumstances. At the same time, sharp downturns are nothing new, either.
“We have a history in this nation of things happening to us every eight years,” says Brian Lynn, managing partner at Claritas Financial Partners. “You can go back and look at all of these events throughout history—a litany of disasters that have happened going back to the [1920s]. It seems to happen every five, six, eight years, whether it was the crash of ’29 to the Great Depression to things like Pearl Harbor.
“The financial recession of 2008 was one we did to ourselves; it was created by the financial system. This pandemic is one that happened to us. It does feel different; it feels different every time. The market and financial systems are not immune to these types of things and they happen more than you might think.”
Gary Begnaud, executive vice president of Begnaud Wealth Management Group of Janney Montgomery Scott, has almost four decades of experience in financial services. Although the pandemic reminds him of other crises he has lived through, it is not exactly the same.
“It was unfamiliar but it was familiar,” he says. “It was a different thing happening in the world but for the markets it was similar. [Last] March was the same as ’87 when the market went down 30% in one day. In 2001 after 9/11, the market opened up down 2,500 points or something and everyone wanted to sell. They were panicking emotionally.”
As the markets suffered during the early months of the pandemic, it was the responsibility of financial professionals to help their clients see past the emotions of the moment and not make rash decisions that could affect them down the line. But that was sometimes difficult since people had so many questions about the virus and there was a lot of uncertainty.
“[I]f you want to get statistics on coronavirus or the stock market, it’s literally at your fingertips,” says Robert “Rory” O’Hara III, founder of The O’Hara Group, a wealth management advisory team at Merrill Lynch. “For that reason I think it becomes a lot more emotional when you’re now looking at this wealth that you’re either building or you’ve created and you’re trying to preserve it, and you have a shock to the system like a recession and significant loss in a short period of time.”
O’Hara encouraged clients to not make quick decisions and to hold off on the urge to sell low on their investments. “Just like if you’re playing golf or driving a car, if you try to rush something and act very quickly without having a thought-out plan, typically the end result isn’t as positive as it would have been if you had taken your time, thought about it rationally and then made the decision,” he says. “Helping clients with their emotions and helping control their investment behavior is very important because you want to prevent the decisions that do not work in their favor. Trying to either get out of the market or make abrupt changes at that point in time when emotions are leading your behavior is generally not the smartest move.”
Begnaud had a similar approach with his clients’ quality investments, and the decision not to panic paid off as the market quickly recovered. Lynn also saw opportunities for those clients in good financial standing to take advantage of the low prices in the market.
“If they had a 30% off sale at the grocery store or at Nordstrom, people would be lining up,” he says. “When they have a 30% off sale in my business, people are running for the hills. When you look at some of the quality companies that were off 30, 40, 50%, it does take a long-term view and a lot of foresight, but those turn out to be historically the best times to buy.”
For those seeking investments not directly tied to the market, Begnaud suggests that commodities like oil and gas or gold and silver may be enticing, along with annuities that provide a guaranteed income. O’Hara agrees that thinking outside of the box during this time can be beneficial.
“I believe that alternative investments are necessary part of a fully diversified portfolio,” he says. “Especially now given that interest rates have been depressed and as interest rates begin to rise, generally speaking, bond prices can drop and the stock market has reminded everyone how volatile it can be. Having another piece of the portfolio that might zig when the stock market zags or might perform better than bonds over the next one to five years is a very intelligent addition to anyone’s portfolio.”
Lynn preaches caution to his clients when considering alternative investments. “There are a lot of alternative investments out there and some are very good, because it’s a way to not tie your assets to the traditional asset class of stocks, bonds and real estate. Gold, commodities and currencies play a meaningful part in a portfolio, you just have to be careful about the individual investments that you’re selecting.”
Of course, the nature of the pandemic has affected so many businesses differently and many people have been dealing with the loss of jobs or at least the threat. O’Hara has not seen that happen with his client base, but many have had to financially support adult children or other family members impacted by layoffs.
“It shows the importance of not having every dollar invested, having some sort of emergency fund, whether that’s three months of monthly spending or six months of monthly spending,” he says.
Situations like that will hopefully be less common as signs start to point up regarding the economy. With COVID-19 vaccines becoming more easily available and businesses slowly but surely starting to reopen, financial experts are cautiously optimistic about the next few months.
“Everyone is experiencing this for the first time and trying to learn about the vaccines and how available and successful they are. It’s anybody’s guess what reopening is going to look like or the time frame but it certainly looks to be improving in my opinion,” O’Hara says. “The sooner we can get back to whatever this new normal is, the better. We’re going to be interacting with each other, kids will be going back to school, meetings will be face to face as opposed to virtual. So overall I’m optimistic for the rest of 2021.”
“The two main statistics for gauging the health of the U.S. economy are the growth of the GDP and jobs,” Lynn adds. “With the vaccine coming out we are looking forward to a healthy GDP and we’re looking forward to jobs coming back. Everything else rolls from there. For a local community like South Jersey, that’s extremely important. We need a healthy economy for restaurant owners, for the Shore community, and for everybody around here.”

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Published and copyrighted in South Jersey Magazine, Volume 17, Issue 12 (March 2021).

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Author: Matt Cosentino


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