This is the second major market crash of my 16 year career as a financial adviser. The last one, widely known as ‘the banking crisis’ has a clear culprit – anger was aimed squarely at the banks, for their perceived greed, poor decisions and it was dubbed as the tax payer bailing out the banks.
The Covid-19 crisis has a very different feel, from a market perspective the fall was much steeper (although so has been the subsequent partial recovery), but also there is much less finger pointing. Yes, there will be political points scoring and endless debates of who could’ve done better than Boris (we all know a “could’ve, would’ve, should’ve”) but the tone in general has been much more reasonable as there is a genuine human tragedy running alongside the financial implications.
I am not going to debate the politics or the science here, but I am going to pose a challenging reflective question:
Did we each take enough responsibility to plan for an emergency?
I accept that largely this pandemic was unforeseen, but this is precisely why good financial advice is underpinned with basics such as an emergency fund and ensuring sufficient protection (insurance policies) are in place.
Armstrong Watson recently wrote another article on “The Importance of Regular Financial Reviews”, commenting that “It is common for people to think they don’t need to regularly review their finances because of a preconception that only those with significant wealth need to do so. This is not true. Whatever wealth means to you, whether it is tangible assets or the security of knowing that you can provide for your family, regular ongoing advice is vitally important.”
To build on this further some rather alarming recent savings statistics, provided by finder.com, shows that over 40% of the population don’t have enough savings to live for a month without income.
The question posed here is not to be smart after the event, nor to chastise. It is to draw a wider audience into the importance of financial planning. Some have a large amount of money to invest or a large estate that needs inheritance tax planning, others may not yet be in that position. The point I’m making is that financial planning is equally important for those who do not consider themselves to be wealthy or for those at the start of the journey of wealth accumulation.
The objective is to get in front of your goals and have a clear financial plan that is personalised to you and your needs. Importantly it should be underpinned by an emergency fund (at least three months income) and protection that is appropriate to supporting you and your family and/or business should the unforeseen happen like death or long term illness.
Death and serious illness insurance is an emotive subject, but of all the things we do insure (cars, home including contents, pets etc.) our own lives and income must be the most important.
I am no scientist (or politician) but I suspect we will face more unexpected challenges in the future, let us do all we can to financially prepare. We continue to be available either by telephone, video meetings or by face to face meetings with the appropriate social distancing and precautions in place.