Time to Regroup

2020 was a turbulent year for the stock market. Now how do you adjust to the recovery?

Perspective Guest

As we begin to regain our lives, remember for a moment how you felt early in 2020 when you realized you could not interact with friends and family, couldn’t go to a favorite place or get basic necessities, but could get sick or lose a loved one because of a rapidly spreading, mysterious disease.

I remember the facial expressions via Zoom meetings and alarmed voices on the phone when clients expressed concerned about their careers, businesses, health and investments. Even some of our experienced advisors were rattled. My goal was to encourage them to stick with the plan we had in place for the next recession, regardless of the cause.

For clients earning income, we shifted their distributions to come from cash and conservative investments, allowing more volatile holdings to recover. For those still building wealth and who had enough emergency reserves, we shifted some funds to more growth-oriented vehicles to take advantage of the dip. Some investors panicked and took a loss they will never recover from. But most clients are better off financially a year later than they even expected before we ever heard of COVID-19.

So, what now? We have witnessed a full-blown recession and recovery in one year, a cycle that typically takes half a decade. Does that count as the recession we have all braced for over the last several years? Did it shake out the businesses that were not ready for whatever future awaited us? Did it define the industries, companies and sectors that will mold the future world and create wealth for all of us? The changes already underway before the pandemic toward more technology, working from home and increased government dependence and assistance went into warp speed. How is all of this going to impact your portfolio? What should you do about it?

Our clients often ask where the economy is heading and what stocks will make quick returns. Not since the 2008 recession have clients become so focused on specific stocks or industries and called me with stock suggestions.

How will the current political environment affect financial markets? Those who despised the previous administration, or fear the new one, all want to know what the political changes mean economically. Grab a highlighter, here’s my answer: I DON’T KNOW. No one does.

The best way to build a solid plan is to remove the current noise and hype and political opinions and focus on your goals and life changes. Know before something crazy happens how you plan to adjust. That way, your reaction to the emotion of the unexpected can be simplified to a preplanned response to a 20% drop in the S&P 500, for example.

Without getting too technical, here’s the bottom line: Revisit your plan based on how COVID-19, the 2008 financial crisis, the tech stocks bust, and other smaller market corrections affected you personally.

Those things shook us up, and you landed wherever you are now as a result of how you responded. It’s no longer a risk questionnaire you answered about how you would respond if this or that happened in the markets. We saw it, felt it, responded to it, and now we must learn from it. Consider how it impacted you, your emotional or logical response and your financial health. From there, you can adjust your plan and prepare for the next inevitable crisis that no one is expecting, few will predict and none will know the precise cause, severity, length and timing.

It’s important to see financial planning as more than just how your portfolio performs. It also includes things like tax efficiency, estate planning, how to navigate Social Security, health care costs if you retire before Medicare, adjusting income sources in retirement to freeze property tax increases, reduce the tax on Social Security, inherit or pass on money smoothly and with minimal tax implications, give to charity with the best tax benefits and more. Attorneys and CPAs do a great job accounting for and making sure your plan is filed legally.

It also helps to open up to your financial advisor, who should have access to a Certified Financial Planner, and pull those skills together. Don’t assume that any one of those has all the answers. When I hear someone tell me their attorney told them to buy XYZ stock or invest in a certain industry, I ask them, what did their plumber suggest? Or what does their doctor think they should do about their last will? Find professionals who focus on their areas of expertise and respect the knowledge of other professionals. My favorite meetings are with the attorneys and CPAs of my clients where we all get to learn something and create the best plans.

As 2021 unfolds, life will certainly bring more surprises — every year does. What matters most is that you and your advisor create a plan that will give you the confidence to stick with it when the unexpected happens. Or better yet, even if this year turns out to be more wonderfully boring than the last one.


Perspective Guest Jasonbezou 1

Jason Bezou is the founder and president of Bezou Financial Planning Group. He is a Certified Financial Planner (CFP) and Accredited Asset Management Specialist (AAMS). In three out of the last five years with Capital One, Bezou was the No. 1 advisor in the country in client assets invested. He is one of just 33 advisors in the United States handpicked by Capital One Investing and Woodbury Financial to help ensure that former Capital One clients continue to move toward their financial goals. Those loyal clients enabled him to start Bezou Financial Planning Group.