These are trying times for people all over the world and India is no exception. Even before getting into the COIVD crisis, our economy was not doing well. The onset of the virus has only aggravated the situation. To dodge the virus, India has been forced to implement a three week nationwide lockdown. At this point of time, we are not sure how many such lockdowns and measures would be needed to come out less hurt from the virus.
This is creating anxiety among us. We have people with family members with existing chronic diseases and are worried about how their treatment will get impacted. We may know a close person who has tested COVID positive. We may have a person in the locality who has lost his or her life because of the virus. We have companies that have reduced the pay of employees and we have friends who have lost their jobs. There are college pass outs who are staring at first job offer which may get dropped or at best delayed. There has been a significant reduction in the net worth for most of us and the achievement of our financial goals may be at risk.
Almost all of us have one or more of these concerns to address. Lately, I am getting many queries from my clients and I am spending a significant amount of time with them. While they want to stay healthy and protect their family from the virus, they are feeling better placed from a financial planning perspective.
All of them are happy about a few things which they have done in the recent past. They have created an emergency fund of 6-12 months which means they will be able to tide over these tough times if it results in a job loss. They have purchased Term Life insurance beyond their company coverage which means their family is better prepared in case there is a loss of life of a bread earner because of unexpected reasons. They have family health insurance beyond their company health insurance coverage which means they will be able to take care of any health issues if they go out of job.
Well, covering these basics do not get enough attention when Financial Planning is done and there is a genuine reason for that. The basics are largely covering for risks and it is hard to realize the benefits of a risk coverage till the time the risk becomes real. The COVID crisis has increased the chances of these risks to become real.
While most of us put some level of effort to get our basics covered, how about having a Will in place. Majority of us do not have that. The COVID crisis has spurred people into thinking that should they get their Will in place to ensure a smooth transfer of assets from their parents to them and from them to their heirs. It is a no brainer that a Will ensures easy transfer of estates maintaining the goodwill among family members.
Some of my clients are first-timers in the equity market. The equity market has taken a significant hit and so has their equity portfolio and it is natural for them to validate whether those investment decisions are right. Since the investment for short term goals does not include equity, they are fine with that. The long term goals have equity and it has taken a hit. Predominantly, my effort goes in educating them about the peculiarity of equity as an asset class. Equity is inherently volatile and gives higher returns with higher risk, hence the investment duration needs to be longer to reduce the impact of volatility.
I also have clients who are seasoned equity investors, who have gone through the 2000 and 2008 market crash and did not have much luck then but want to get into the equity market at lower levels. Their common question is that they have surplus money which is not needed in the short term and how they can deploy that in the market. Well, finding the bottom is something which nobody can do with consistent accuracy hence the only approach which is advisable is to invest money periodically over the duration in which the market is expected to be low.
In the professional term, you would think that the financial adviser’s job gets over with the offering of financial advice. By nature of my profession, I know about my clients more than anybody else and that creates an opportunity for me to help them beyond financial advice. Over a period, most of my clients have become close friends and have reached out to me for help with non-financial matters. Some approached me during a health crisis when they wanted help in getting their claims processed. Some others wanted help in finding a new opportunity, post a job loss.
The financial advisory has taken different meaning during these tough times. Clients are looking for somebody who can empathise with them and validate their thought process. Could we go beyond the call of duty, offer hope and lend a helping hand during this lean patch? I have limited capability, but I try wherever possible.
The writer is a SEBI Registered Adviser and Founder of FinMyn (https://finmyn.com). He provides Fee-Only Financial Planning and Investment Advisory services. If you want to know more about him, click on https://finmyn.com/about/.