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Money Matters

The term “unprecedented times” has been thrown around often in reference to the COVID-19 pandemic. As it relates to the economic crisis that struck early last year as a result of the coronavirus, and which the United States continues to fight its way through, it is true that we are facing unique conditions.

“It’s completely different because of the circumstances. We’ve never seen the economy completely shut down before, not even during World War II. We had never seen an entire world economy basically shut down, and that’s what we saw in 2020. From that standpoint, there’s been nothing like it before, and hopefully there never will be in the future,” says Keith Davis, a certified financial planner at Executive Wealth Management of Raymond James. 

As the markets suffered during the early months of the pandemic, it was the responsibility of financial professionals to help their clients see past the emotions of the moment and not make rash decisions that could affect them down the line. But that was sometimes difficult since people had so many questions about the virus and there was a lot of uncertainty.

Emotions, while they can help and protect us in many situations, can oftentimes hurt us when making financial decisions,” says Colby Wilson, a board member and the former president of the Financial Planning Association of Central Florida. “While a crisis like the one we’ve experienced, and are still continuing to go through, can evoke emotional responses, it is important to take a step back and consider all of the information that is available. From an economic perspective, the stock market is not concerned nearly as much about emotions, but instead facts, figures and end results. If we make emotional decisions around our finances, we can oftentimes make decisions that help us feel better but cause irreparable damage long into the future. It feels ‘good’ to sell out of the market because there is so much uncertainty, but if you sold out of the market one year ago and did not get back in because you were still concerned, you’ve missed out on one of the fastest stock market recoveries we’ve seen in 30-plus years.”

Kevin Mullally, an assistant professor of finance in the College of Business at the University of Central Florida, agrees that people should not make quick decisions and should hold off on the urge to sell low on their investments.

“During the 2008 recession, the market went down like 40% and a lot of people close to retirement age got freaked out. They thought because of that [drastic] swing, that it would continue [in that direction] and they pulled their money out of the market at a decrease and then they missed the upswing,” he says. 

“The market is unpredictable and your best strategy is to stay in long term. In March 2020, we had a minus 20% event, but it was up for the rest of the year. We’ve seen it time and time again … eventually the market will rebound. But it’s very difficult for professional money managers to time the market and that’s certainly also true for novice investors,” Mullally adds.

For folks who aren’t living off their investments and are still in the working world and in good financial standing, crises like the pandemic create an opportunity to buy instead of sell. And because of the volatility in the market, they may be attracted to alternative investments, but buyer beware warns Aaron Bert, CFP, AIF, Certified Financial Group in Altamonte Springs. 

People are always looking for the next big thing to diversify their portfolio such as rental real estate, bitcoin, inverse ETF’s, or anything else that’s negatively correlated. So when stocks go down, these sometimes go up.; however, often the alternatives can be just as volatile (or more so) than more traditional investing, or they have severe tax consequences. They just don’t understand what they’re getting themselves into. Fortunately, this correction was such a short-lived thing that we didn’t see much demand for alternatives,” says Bert. 

Another thing the pandemic has shown is the importance of not having every dollar invested and having some sort of emergency fund on hand. “As an advisor, we direct clients to have anywhere from three to nine months of cash on hand for emergencies. For those who are adequately prepared, it gives you a chance to take a step back and consider your options while not being forced to make a significant decision while being under the pressure of having to find those funds as soon as possible. If you can take a few weeks to take a step back and understand your next steps, it will give you a chance to make some important decisions in a rational frame of mind,” says Winslow.

Situations like that will hopefully be less common as signs start to point up regarding the economy. With COVID-19 vaccines becoming more easily available and businesses slowly but surely starting to reopen, financial experts are cautiously optimistic about the next few months.

“My gut tells me that with the optimism surrounding the vaccine, that we are starting to return to some level of normality,” says Mullally.

Take it to the Bank
As it became apparent that the pandemic wasn’t just a public health crisis, but a major financial crisis as well, a refrain commonly heard throughout the business world was the importance of being able to pivot in order to meet the moment. One of the best examples of this has taken place in the banking industry which not only had to significantly adapt the consumer experience, but also assist commercial customers with navigating the Paycheck Protection Program (PPP) and other available economic relief.

The unprecedented nature of the pandemic didn’t exactly make that an easy transition, especially in the early stages when the economic fallout was happening in real time. Further complicating matters was the fact that many employees rapidly shifted to working from home, which caused the need to adopt new operating procedures that would keep staff safe and customers connected.

“Hopefully we’ll never see this again. [The pandemic] has paralyzed our economy and our nation,” says Alex Sanchez, president and CEO of the Florida Bankers Association.

And now that it’s been over a year since the pandemic began, institutions are using the lessons learned along the way to determine which means of operation will have lasting effects. The increased reliance on technology to sustain critical needs has paved the way for new methods of interacting remotely—and in some cases, more efficiently.

“Having not only the ability to monitor your account but also the ability to interact with your account is [crucial]. I couldn’t live without it and I know customers couldn’t live without it. We still have our branches open because it is good to be able to walk in, sit down and get that financial education from someone. But having the convenience of digital banking was already big before the pandemic, and the pandemic just shined a light on the importance of having digital banking,” says Jennifer Waddell, vice president of retail banking with Axiom Bank.

Sanchez also notes that these technological tools have been gaining momentum for some time now and have cemented their place in our everyday lives.

“My bank branch is in my hands; my smartphone,” says Sanchez. “Banks today are like technology companies that happen to have FDIC insurance. They have invested tons of money to better serve our customers and so the technological advances you see today that have been highlighted during the pandemic are definitely here to stay.”

But regardless of technological advances, relationship banking will always be a hallmark according to Sanchez, and he says the pandemic put a heightened emphasis on the importance of maintaining close relationships between an institution and its customers, especially for individuals and business owners trying to navigate the murky waters of the PPP. 

“Florida banks have processed hundreds of thousands of loans, bringing back almost $50 billion to help small businesses to survive the pandemic. What do I tell small business owners? Go see your FDIC banker and make sure you have a relationship with them, it’s very important. The PPP process reconfirmed the importance of having that relationship,” says Sanchez.

This article originally appeared in Orlando Family Magazine’s April 2021 issue.