Kyle Whittington learned the basics of financial planning at an early age.
When he was in high school and college, Whittington says, his dad gave him a checking account and said, “Okay, here is what your stipend is going to be. You have to utilize this money to buy your gas, buy your groceries. You’re going to get a little bit every month to buy clothes.”
“He was really good about instilling that discipline and the same thing with a credit card. You can use your credit card to build your credit score but don’t use it to build up debt,” he says.
Whittington put the fatherly advice to good use and is now president of Meld Financial Inc., an independent financial advising firm in Birmingham, and like other financial planners, has been busy reassuring clients that the financial planning business has been resilient in the face of the COVID-19 pandemic, and while financial advice might be delivered differently than in the past, it is just as reliable.
“The pandemic has not affected us that much,” Whittington says. “We were fortunate to be able to work remotely and talk to clients in general. I would say that more than anything, when we have tumultuous times in the market, we are very proactive about reaching out to our clients, and a lot of that comes from the fact that we’re not out selling anything.”
Financial planners value face-to-face contact with clients. While that’s slowly returning to normal, says Drew Gearhart, client consultant with Warren Averett Asset Management in Birmingham, it’s been more of a challenge for financial folks than for some others.
“We’re not allowed to use Zoom for security purposes,” Gearhart says. “We are trying to give some sort of visual engagement but it’s difficult.” So, they work to get everyone vaccinated and rekindle client interaction.
When the market was yo-yoing, Whittington says, “We ramped up contact with our clients to make sure that they understood, that hey, we know these things are going to happen. We don’t know when and we don’t know what’s going to cause it, but when it does, we feel that for the most part we are very much in a position to be to be able to weather that storm.
“And so, we reached out a lot to our clients and let them know, you are in a good spot. You’re exactly where you’re supposed to be. This is why we aren’t taking on an inordinate amount of risk and why we recommend to you early on not take on a lot of risk and for those clients that we have that aren’t close to retirement, well, it wasn’t a big deal.”
Mac Frasier, director of planning at Oakworth Capital Bank in Birmingham, says planning ahead is key to surviving any type of income loss under any circumstances and is a fundamental of any good financial planner’s strategy.
“You never know what emergencies might come up, whether it is an air conditioner going out or finding yourself out of work because of a pandemic. A good general rule of thumb is having six months’ worth of expenses for somebody that is in a single income household. For dual income households probably more like three months of expenses. But each person’s circumstances will be unique.”
John Norris, chief economist and head of thought leadership at Oakworth, adds: “What we have found is that everyone has experienced some pain during the pandemic. The job losses have been heavily concentrated in the more unskilled professions, or economic sectors, meaning that the people who could withstand the epidemic downturn the least got it the worst, and, unfortunately, that is the way it is when it comes to recessions or downturns.”
Beware the credit card
All the financial planners emphasized the need to be wary of credit card debt, especially during a pandemic.
“If you are going to use a credit card,” says Whittington, “make sure you pay it off every month. It’s effective if you are in a bind, but you need to pay it off. The interest on them is so high. To utilize a credit card, if you’re in a pinch, I understand it, especially in the pandemic environment. I understand that this was a very unique time period for many people just trying to survive, especially if they own their own business. Many of them may have needed the credit card debt in order to do that. But the scary part about that is you end up eating a very high interest rate and it makes it very difficult to pay that money back.”
If you do incur a large credit card debt, Frasier says, the first thing to do is “really get organized and stop the bleeding. So look at your credit cards, understand what the balances are, and see if you have recurring subscription services coming out. I am talking Netflix, memberships, things like that that continue to hit your credit cards every month that you may or may not be using, and start paying off that highest rate card first and then once you have that paid off, move that payment amount to the next highest credit card, so you really start to accumulate some momentum.”
Gearhart says his firm tries to instill in its clients “not to get too high during the good times or too low during the bad times” and to “systematically continue to contribute over time to their retirement accounts, accurately assess their appetite for risk to make sure that when we have these drops in the market that they are not worried about their accounts plummeting and if the market is down 30%, their portfolio might be down only 10%.”
Check those expenses
Another piece of advice from the financial planners: Simplify your life and your expenses.
Everybody checks assets and many check markets, but surprisingly few track their expenses, says Whittington, even though they are a major driver of financial well-being.
Sometimes that tracking turns up surprises. “I personally went through and found we had a babysitter that signed up for HBO on our account and we had no idea and I caught it a few months later,” Gearhart says.
So, what is to be learned from the pandemic?
“You can never prepare for a Black Swan event,” says Frasier, referring to an event in history that is unprecedented and unexpected when it occurs. “I think the biggest thing is obviously have a plan but be flexible. Life changes,” so working with a planner who can provide advice that’s not biased and not emotionally charged can be invaluable.
Says Gearhart: “There is always going to be volatility and you just have to be diligent and have plans in place and you always have to stay calm, that this is just a part of investing and it is our job to watch this for clients.”