Do your clients lack financial resilience? Here’s how advice could help

If you had to choose a word to describe the last few years, “uncertain” might be high up on your list.

With the Covid-19 pandemic, cost of living crisis, and political changes all causing shifts in our day-to-day lives, your clients could be coming to you with doubts, confusion, and low financial confidence.

Put simply, the events of the last few years could have worn down your clients’ financial resilience.

Interestingly, HL reports that Brits’ overall financial resilience actually rose during the pandemic thanks to a suite of government support, including the furlough scheme. But sadly, once the government began to withdraw this help, UK citizens started to lose financial resilience at a rapid pace.

A lack of resilience could lead to emotionally driven decision-making, along with increased levels of anxiety around money on the whole.

Continue reading to learn the areas in which your clients could benefit from both emotional and fiscal resilience, and how we might be able to help.

Investing

In March 2020, global markets took a significant downturn after the implementation of Covid-19 restrictions.

The uncertainty of the pandemic took its toll on investment performance around the world for years afterwards – in fact, some regions and indexes are still experiencing volatility to this day.

As such, your clients might have lost confidence in the benefits of long-term investing. This loss of faith might manifest in several ways, including:

• Panic-selling holdings that experience temporary downswings
• Favouring cash savings over investing
• De-risking their portfolio
• Feeling extremely anxious about the prospect of investing.

On the whole, these actions are symptomatic of reduced financial resilience.

While your clients can’t be blamed for feeling worried about their money, it may help to introduce them to a financial planner who can help them regain confidence.

We can:

• Design a portfolio that is appropriate for your client’s risk tolerance
• Talk to your clients about their life goals and work to design an investment strategy geared towards them
• Take an empathetic approach to their loss of investing resilience after a few years of market volatility.

We’re here to help your clients align their goals with their investment strategy – even if they’ve lost confidence.

Emergencies

Being prepared for an emergency is an essential facet of any financial plan, but during the cost of living crisis, your clients may have unknowingly lost some of their financial resilience.

This could dampen their ability to cope with an emergency, such as unexpected home repairs or a sudden loss of income.

As we explore in our recent blog, research from MoneyAge reveals that the cost of three to six months’ essential expenses has gone up by around £1,000 in just two years. Rising costs, including the cost of food and mortgage repayments, has led many people’s basic expenditure to increase substantially.

So, even if your clients feel able to cope with an unexpected event, their emergency savings might not go as far as they expect.

This is where working with a financial planner could come in handy.

We can look at any potential risks to your clients’ wealth – an illness, injury, job loss, or home damage, for example – and explore whether they could cope with this without taking on debt or depleting their hard-earned savings.

Retirement

MoneyAge reports that retirement resilience is set to fall over the course of 2024.

This is measured by the number of households on track to have a “moderate retirement income” falling to just 39%.

But even if your clients have plenty of wealth, this does not automatically make them financially resilient.

If they are approaching retirement, your clients might be preparing to draw from their pension for the first time. They may also be exploring other options, including liquidating investments, to support themselves in retirement.

In any case, without financial planning, they could find themselves losing valuable wealth to unnecessary tax when they retire.

Similarly, if your clients do not think far enough ahead when they retire, they could be at risk of running out of wealth. This is especially true considering that, as Fidelity reports, up to 3 in 4 people are likely to need some form of later-life care – and this alone can costs thousands a year.

With all this in mind, it may help to introduce your retiring clients to a financial planner who can work with them to ensure their wealth is resilient as they enter retirement. We can also guide your clients towards a more emotionally resilient retirement mindset that boosts their confidence when making financial decisions.

Put your clients in touch with us to help improve their financial resilience

If your clients lack financial resilience in the above areas, we’re here to help. To learn more, email enquiries@prosserknowles.co.uk or call 01905 619 100.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.