One of the privileges of my role as a chartered financial planner is to get to know clients well and play a small part in their lives.
We get to know their families, their hopes and fears and, importantly, how they are feeling. It follows then that, occasionally, with sadness, we have the opportunity to pay our last respects.
One long-standing client and friend was laid to rest recently. Sadly, due to the Coronavirus, the service was restricted to immediate family.
She was a funny, feisty and challenging character who would seldom let you leave without expecting to share a sharp whisky.
She will be greatly missed by her family and all who knew her, but when the virus passes I think the celebration of her life will be more joyful and well attended than would have been possible last week.
Instead I hit the road to pick up my son and daughter from university. Talking to clients, making sure the wider family is safe is understandably our priority and while there will no doubt be challenging times ahead, taking care of those closest is what matters most.
History doesn’t repeat itself, but it often rhymes. We all remember Tony Blair saying this is not a time for soundbites and then launching into a soundbite. Can I apologise if I fail also to follow his advice?
History doesn’t repeat itself, but it often rhymes. We must understand what has happened before to inform our perception of what happens next and what decisions should be made to protect and enhance our financial plans.
The major financial events of the last century are chronicled on the wall of both our meeting rooms at Phillip Bates & Co Financial Services and I have often discussed with clients how historical events have impacted investment returns.
It is useful to understand how markets work, while remembering all portfolios also have diversification into fixed interest, real assets and cash. Stock markets are called markets because they are effectively a trading place for people to buy and sell their share of a company’s value.
The price is established at the point where buyers and sellers are both content to trade. If there are more buyers than sellers then the price goes up to a point where an equilibrium is reached. Recently there have been more sellers than buyers and hence values go down.
It is understandable when there is worry and uncertainty, buyers are scarce and hence falls in value continue until buyers see value, enough for them to trade. When worry reduces, buyers see value ahead and the price moves upwards to meet increased demand for shares.
An analysis of market falls for the last 30 years and the ensuing recovery period reveals that the longest period for recovery is 30 months and averages are much lower.
Now, I am not ready for predictions but the systemic damage through a clogging up of trade through the pandemic feels less permanent than the loss of confidence in the value of assets during the financial crisis of 2008.
The outcome is certain though to be a huge increase in Government debt in most economies, so get ready for tax rises when this is all over.
Most important is having income or cash to spend while any recovery happens. This is a massive part of having a robust financial plan and why these falls should not be a worry with a sensible long-term plan. Missing out on the recovery when it happens is perhaps more damaging to clients.
Comparing our middle of the road investment approach to the FTSE All Share shows how diversification helps dampen losses. This demonstrates the benefits of not having all eggs in one basket.
There will be many challenging times ahead for business owners and private investors. Our chartered financial planners and the wider Phillip Bates & Co team will be doing their very best to stay on top of the information and trends that emerge during this fast-evolving crisis.
If you would like to have a free initial consultation about the implications of the coronavirus or any other financial matter, please contact me on 0151 353 1066 or email: firstname.lastname@example.org or visit www.pbatesfs.co.uk.