Wealth Management Is More than Investing

YOUNGSTOWN – Through all the ups and downs of 2020, it was wealth management advisers’ skills beyond investing that helped clients through the disruptive year. 

While the profession’s most visible skill is often helping clients assemble portfolios that generate money, that isn’t the full scope of their abilities.

“People want to be prepared. So I’ve seen that more than anything. It’s been a chance to talk about the financial planning side of things,” says Kelcie Schiraldi, owner of Living Stone Wealth Management in Columbiana.

“They thought about if they had everything in place should, God forbid, something would happen,” she continues. “People saw family members passing away or getting sick. It forced them to reevaluate things like life insurance or add in a scenario to their plan for an unexpected death. We could talk about these things, whereas before we’d bring it up but the feeling was, ‘That’s never going to happen.’ Once we saw the pandemic, people realized they needed to talk about it.”

Coming into the new year and the approaching end of the pandemic, the focus now is on rebuilding, both in terms of confidence and what’s in a portfolio. Last year saw more upended than just the stock market, says Robert Jazwinski, founder and president of JFS Wealth Advisors in Hermitage, Pa.

“It affected our lives and lifestyles. A big part of succeeding in anything is resilience and being able to bounce back. That’s what I saw in 2020. We had a huge equity market decline in a short period of time and lives were disrupted as work-from-home rules took place,” he says. “It’s so important to always be prepared for unexpected, adverse developments.”

If portfolios were well-constructed before the stock market crashed at the onset of the pandemic, explains Ryan Glinn, they were set to weather at least some of the storm. Bonds are a crucial part of plans, the W3 Wealth Management financial adviser continues, because they tend to be more stable than equities.

“Bonds help smooth the ride. When the market was down 33%, the bond market was essentially flat. That buoyed our portfolios,” he says. “An entirely equity portfolio may have been down 35%, while a 50-50 or 60-40 [stock to bond] ratio may have been down 12% or 16%. That’s a lot less pain.”

But the biggest lesson may have been what wealth management advisers have preached for years: stick to the plan. By year’s end, the S&P 500 was up 16% from where it started 2020.

“The folks who got hurt in 2020 are the ones who made big moves in March or early April,” Glinn says. “The ones who backed out and missed the recovery are the ones hurting.”

The crash was also a chance to reassess portfolios, Schiraldi says, and gauge how comfortable clients really were with their plans.

“People who had a very aggressive investment objective, when they saw the market go down 30%, they took a step back,” she says. “From the investment side, it was a great chance to reassess investment objectives and see if they were OK with standing the losses they saw.”   

Looking ahead, wealth managers are anticipating the economic recovery from the coronavirus pandemic. After a year of explosive growth by tech companies – especially those that benefited from the shift to remote work – those stock prices are likely to correct, Jazwinski says.

“When you get into a period like this, investors tend to want to chase returns. What looks best over the past five years is clearly technology and growth stocks. But it’s unlikely they’ll be the best-performing sector going forward,” Jazwinski says. “I’d urge stock investors to not chase performance because I think we’ll see better performance from areas that got beat up pretty bad during the pandemic and are now recovering.”

There’s also the matter of how the federal government will pay for its multi-trillion dollar relief bills over the past year. While the sense now is that such spending is necessary, the bills will still need to be paid at some point. Speculation over inflation, Glinn says, could drive down returns on bonds.

“You’re seeing the bond market taking a hit because of this anticipation of increased interest rates and potential inflation,” he says.

But whatever 2021 – and beyond – holds, the lessons of the past year are important to remember.

“It’s about building up confidence again. 2020 hit people really hard in a number of ways – financially, emotionally,” Schiraldi says. “Coming into the new year, a lot of people’s goal is to build confidence in their financial plans, in their finances, in their jobs. [Wealth management] isn’t always just investment management and picking the best stocks. It can be focusing on the other services in the wealth management world like insurance planning and tax planning.”