‘Getting back to “normal” may have its bumps for Canadians as the economy reopens, clients face pandemic aftershocks and advisors look for all the new – and bad – habits their clients have collected during COVID-19.
While many advisors have put together a financial plan for their clients there have been a number of financial aftershocks during the pandemic that affected clients’ abilities to follow their personal strategies, said Stephanie Holmes-Winton of Halifax-based CacheFlo.
Some clients benefited from not having to commute and saved money on that – but many bought other things instead.
“It will be hard to break the new habits they created during the pandemic,” said Holmes-Winton. “So, we may see a double whammy in that people start spending on travel and commuting and all of those things, but they don’t stop spending the extra charges they may have made during the pandemic, like doing more online shopping or that sort of thing.”
Spending more
Holmes-Winton added that those who feel the worst is over from the pandemic are spending even more than they originally intended.
The impact on a client’s cash flow runs the gamut from splurging on one or two expensive gifts to holding tight to what they have depending on the industry they’re in. But if they don’t intentionally put that money into savings and continue to build on that new habit, those savings won’t last long, she cautioned.
“The pandemic is going to affect people’s cash flow in different ways and, as a result, it will hit the advisor’s bottom line.” - Stephanie Holmes-Winton
Then there are clients who have dealt with the worst the pandemic could hurl at them. These folks aren’t even bothering to look at their financial plans right now because they may think they don’t have enough cash flow for anything.
“[But] if ever there was a time to look at that client’s cash flow as part of the overall planning process, it’s now, said Holmes-Winton. “The pandemic is going to affect people’s cash flow in different ways and [as a result] it will hit the advisor’s bottom line.”
If there was one good thing to come from the pandemic it was a time for many to put their financial houses in order.
“I think COVID has given a lot of people the opportunity to think and revisit what is or isn’t in place or needs to be addressed even though they may have shelved it for the longest time or never made it much of a priority,” said certified financial planner Brian Ward at BY Design Financial Services Inc.
Looking for peace of mind
“Just knowing what you have, where you have it and whether or not people will be able to access it in the event of a situation – even things that we don’t deal with, such as wills and powers of attorney – are important financial tasks to complete. People want the peace of mind of knowing that their affairs are in order.”
Since COVID-19 began, Ward said people have been asking advisors for more input on the importance of estate planning, like updating wills, powers of attorney, naming an executor and making sure that key people know where all these important documents are kept.
“Clients need to have the foundation in place with respect to their life, their insurance and their will – the foundation used to build everything. I think people are now coming around to realize that.”
Increased interest in insurance coverage
Some advisors are also finding their clients asking for more insurance coverage, whether that be life and health or critical illness insurance. Sometimes all it takes is one incident to make a client ask for more coverage. Ward gave the example of a single, young client who had started to build up his RRSPs and TFSAs and with whom he had talked about life and critical illness insurance. Recently, the client was driving, and a vehicle crossed into his lane and hit him head on, leaving him with a few broken ribs. But it also showed the client the reality of what could have potentially happened.
It’s at times like this that people suddenly want to buy insurance, but some may not be able to get it, he noted. “The whole idea about a plan is to have it there before you actually need it.”
Younger clients
Some younger clients have not yet taken that step but they may be in the market for some kind of insurance, particularly critical illness insurance. While CI currently covers 28 illnesses, it does not include any long-term after effects of COVID-19, said Jeanette Brox, senior financial consultant at IG Wealth Management.
So far COVID hasn’t shown up as an insurability issue. “But I think that’s coming. Insurance companies want to mitigate their losses.”
Then there are those who started with Brox when they were in their early 20s and bought inexpensive term insurance, and are now looking to upgrade, she said.
