Wealth Advisory & Planning
June 11, 2020
Financial Wellbeing in Extraordinary Times
We are all living in extraordinary times. The COVID-19 pandemic and more recent events have a profound impact on society, markets, families and individuals. As always, and especially during a period when information can be contradictory, confusing or heartbreaking, it is Glenmede’s goal to provide a framework that empowers you to make wise financial wealth decisions. This paper sketches out such a framework as a resource for today’s challenging environment and is organized in three main parts:
1. Reminding ourselves of key practices that remain vitally important to maintaining financial and investment health.
2. Reinforcing the habits of individual resilience that allow each of us to manage difficult times as thoughtfully as possible.
3. Exploring challenges and opportunities posed by the current crisis that are specific to clients managing wealth as a family.
For those of you already applying some of the practices we describe, we hope that these pages help to strengthen your existing habits. For others, some of these insights will be new. Whatever the case may be, we share these ideas with you in the spirit of humility, recognizing that you know yourself and your family best.
Key financial practices
In an amazingly short period of time, in the face of the COVID-19 pandemic, much of the world has adopted new and, to many people, unaccustomed personal habits. These include frequent handwashing, avoiding touching our faces, maintaining social distance and wearing facemasks in public. Financial health also depends on sound habits. Glenmede clients are familiar with many of these, which include:
- Identifying personal financial wealth goals and then developing a wealth plan and investment strategy to align with them.
- Regularly asking yourself whether your goals remain the same or have shifted over time due to changing life circumstances.
- Refraining from making one-off changes to plans based on an exciting new planning technique or to portfolios based on exogenous events in the markets or society.
- Reflecting on the disciplined processes that produced your current plan and portfolio during times of high emotional and market stress.
- Remaining an informed and active owner of your wealth plan and financial assets through regular dialogue with your Glenmede advisors and the experts whose insights they can call upon to answer your questions.
“Good financial health does not keep markets from going down or being volatile, but it does allow portfolios to weather those storms without suffering lasting harm,” notes A.J. McCrery, Glenmede Relationship Manager in Wilmington, DE. “The key is maintaining proper perspective and focus through comprehensive planning. This makes it possible to see past short-term volatility and take advantage of conditions to pursue long-term goals.”
In addition, taking an organized approach to managing your estate and financial documents adds to your sense of financial wellbeing. Knowing that your documents are current, that your wishes are known to your loved ones and advisors, and that the information is both safe and accessible bolsters your level of confidence.
According to Mary-Noelle Rasi, Glenmede Wealth Planner, “We generally recommend that basic estate planning documents be revisited every three to five years as a matter of course and whenever there is a significant change in law, family circumstances or the makeup or structure of the estate.” Given the uncertainty of the COVID-19 pandemic and a seemingly constantly changing legal landscape, she adds, “now may be an ideal time to revisit a few basic planning considerations.” At a minimum, the following steps are recommended:
- Review your wills and living revocable trusts to ensure they reflect your current desires and are up to date.
- Confirm that your powers of attorney for financial assets are complete and validly executed in your state of domicile, as state requirements vary.
- Ensure that your advanced directives or living wills name a health care proxy and indicate your preferences for end-of-life care decisions.
- Verify that beneficiary designations for retirement plans and life insurance are current and consistent with your overall plan, especially given the changes instituted by last year’s Secure Act.
Taking these simple steps helps protect clients at any time, and especially during periods of adversity.
Resilience is the ability to grow and bounce back in the face of challenges — an important personal attribute to re-examine during this current environment.
There are three keys to individual resilience: physical care, quality social connections and making your mind work for you.
Physical care involves paying attention to good nutrition, exercise and relaxation. Quality social connections are people who affirm you, help you problem-solve and keep you focused forward.
Making your mind work for you may be less familiar to most people than physical care and quality social connections, so let’s spend a few moments on it here.
As psychologist Susan Massenzio writes, “In crisis, we need to tap into our ability to be our own psychologists, as it were, and to diagnose how our heads are doing. For example, ask yourself: Am I having a hard time making decisions and focusing? Do I find myself feeling anxious, scared or down? Is my sleep disrupted? Noticing these things is the beginning of taking your own mental temperature.”
After you’ve assessed how you’re feeling, stop and notice what you are saying to yourself about the situation. Look through the emotions and pay attention to the statements that your inner voice repeats. Once you’ve listened to what you’re telling yourself, then ask this simple question: Is what I am saying to myself useful?
Massenzio adds, “This process of observing how we are feeling, and then what we are saying to ourselves, rests upon the principles of cognitive-behavioral psychology, which teaches that our emotions or actions follow from our statements to ourselves, which in turn rest upon our beliefs about ourselves or the world. The more we can be aware of this triangle of beliefs, statements, and emotions or actions, the more control and confidence we feel in tough times.”
This process of reflection opens a path to remind yourself of experiences to provide further grounding for realistic hope. Think about how you navigated difficult times in the past. Whatever the nature of past crises (medical, familial, financial, etc.), ask yourself, What skills, knowledge and choices allowed me to find my way through?
Challenges and opportunities for families
Awareness of hot buttons
Whether virtually or in person, it is important to be aware of how family members push each other’s hot buttons, and that these hot buttons normally get more sensitive under stress. To manage interactions that intensify when hot buttons are pushed, there are several things you can do:
- Assume that the person you’re talking with has good intent. Doing so enables you to take a lot of the heat out of the exchange.
- Cultivate your own good intent. At a time when most people feel some fear and sadness, kindness and empathy might be our most important assets.
- Be aware of yourself and what you’re feeling in the interaction. Is it anger? Frustration? Fear? Sadness?
- If you feel things are getting heated, give yourself a pause. An easy way to do this is to count to 10 before replying to something that’s been said.
- During the pause, try to recognize what part you are playing in the exchange. Emotional interactions are never one-sided.
Togetherness and separateness
Despite being sheltered in place and unable to travel, many of us may be seeing (in a virtual sense) more of our extended families than we usually do. That’s not to mention parents who find themselves at home with children, teenagers or young adults nearly 24/7. We may also have renewed appreciation for our families of affinity, our network of friends, colleagues and others who comfort and support each other in tough times. This increased interaction can be a real boost to families’ human capital. It can also add significant stress to an already stressful situation.
In this situation, we recommend that families thoughtfully discuss these points:
- If living together, what ground rules would make the situation more enjoyable? (e.g., rules about noise, vehicle use and visitors, as well as speaking and acting with respect for each other.)
- How will common spaces (e.g., kitchens, living rooms and game rooms) be used and maintained?
- How can family members who are working remotely maintain a quiet, distraction-free workspace?
- At what times or under what conditions are each other’s rooms or houses open for visits?
- What signals can family members use to indicate to each other, respectfully, that a conversation or interaction is becoming too much and that they need some space, physical or psychological?
As Keith Whitaker, Ph.D., Co-President of Wise Counsel Research, observes, “In normal times, wealth often has a centripetal effect. That is, it leads to more family togetherness than if it did not exist. For example, family members may share vacation homes, trips, vehicles and holidays, not to mention investment accounts or trusts. As a result, families with wealth should regularly discuss their desired balance of togetherness and separateness.”
Very likely, some family members want more togetherness, while others prefer more separation. The important thing is to listen to and understand each other.
Talking about serious matters
Empathic communication is crucial for talking about serious matters that might have felt low- priority or hard to discuss before the current crisis. For example, access to food, needed medications and safe clinical environments, as well as personal security.
As noted earlier, many of us have been reviewing our basic planning documents as well as emergency plans. Beyond this review, the next step is to communicate your plans with family members who may have responsibility under different scenarios. For example, who are older family members’ medical proxies? Who will watch younger children if parents are sick or need to self-quarantine?
Families are also engaging each other by clarifying matters that are not necessarily urgent at this time, yet are still important. What matters most to you, and why? How would you answer these questions — and how would your closest family members answer them? If you’re not sure, consider using a video call and asking each participant to share his or her responses.
This conversation could truly deepen your understanding of and appreciation for each other by giving everyone a voice, especially those who are normally reticent to speak up. Families who understand what motivates each other have stronger bonds and help each other realize their hopes and dreams.
Jillian Kukucka, Relationship Manager in Glenmede’s Philadelphia office adds, “This kind of understanding — of family members’ values and dreams — points to the future. These desires hold great importance in the construction and evaluation of financial plans, estate plans and goals-based portfolios.”
Governance means deciding how you make decisions. Some families govern themselves informally. Others have highly developed governance structures, such as Family Councils. Thinking about governance can feel like a luxury. But all the practices we have shared thus far — from emergency preparedness, to ground rules for togetherness, to something as simple as organizing a call — involve governance, because they all involve decision-making.
Take a moment to ask yourself: What specific decisions does my family face in the current crisis? How can we best make those decisions?
“For some of our clients who manage their financial wealth as an extended family, the current crisis has led them to take a hard look at their governance,” says Glenmede Relationship Manager McCrery. “Some are realizing that it is time to advance long-standing plans to devolve decision-making from the family elders to the rising generation, often in the form of a sibling council or partnership, perhaps with a subset of members as an executive team.”
Other families are recognizing the true value of involving non-family experts, such as trustees or other advisors, in their deliberations and decision-making. Many families have recognized that effective decision-making also requires more regular communication.
For some families, the material discussed here can open a path for clear thinking about the opportunities that present under hardship.
Common to many families is the financial goal of passing wealth down to multiple generations in a tax-efficient manner, so taking time to understand techniques that are particularly effective in today’s environment may provide a unique and valuable opportunity for your family. “Similarly, governance discussions can lead to recognizing the need for enhanced education efforts on many fronts. Accordingly, it may be an ideal time for younger generations to learn more about finance or philanthropy, or for older generations to learn more about environmental image and socially responsible investing,” adds Susan Mucciarone, Executive Director of Private Wealth, Glenmede.
The ability to recognize the upside of a crisis is a key component of what we can all learn from this time. While this current crisis has many dimensions, three healthy habits will contribute to maintaining your financial wellbeing, now and well into the future:
1. Exercising sound financial practices, including adhering to goals-based plans and not letting market stress drive you to impulsive decisions.
2. Strengthening your individual resilience, particularly through making sure your mind is working for you, not against you.
3. Using this time as an opportunity to build open, empathic communication and clear decision-making as a family.
One of the most challenging aspects of this crisis is the physical isolation it imposes upon individuals and families. For many of us, this isolation has inspired a push for community. At Glenmede, we have always enjoyed close communication with our client families. That pattern has only grown stronger, as clients and their advisors have had more frequent and more meaningful discussions about what really matters. We encourage you to reach out to your Glenmede advisor to discuss the insights in this paper and how they apply to your family’s unique situation.
Before we close, we want to share one more practice that can strengthen us all: the practice of gratitude. Whether it is at a family meeting or a family dinner, at the end of the gathering encourage each participant to share something he or she is grateful for. In times like this, when we all feel at risk, when much has been taken away, remind yourself, through gratitude, of what you still have and what matters most.
QUESTIONS FOR REFLECTION
You may want to reflect once more on the questions below. Write down your responses so that you can review them later. You may also want to invite other members of your family to reflect on these questions and then discuss your answers:
- What kind of mix of family togetherness and separation do I think that my closest family members want now?
- What specific decisions does my family face in the current crisis?
- How can we best make those decisions?
- What can I do to take care of myself in the areas of nutrition, exercise and relaxation?
- What quality social connections do I want to foster at this time?
- What can I say to myself about the current situation that would be helpful?
- What have I done in the past that has helped me overcome challenges?
- What am I most grateful for?
Susan Mucciarone, Executive Director of Private Wealth, Glenmede
Keith Whitaker, Ph.D., Co-President, Wise Counsel Research Associates
Susan Massenzio, Ph.D., Co-President, Wise Counsel Research Associates
This presentation is intended to provide a review of issues or topics of possible interest to Glenmede Trust Company clients and friends and is not intended as personalized investment, tax or legal advice. It contains Glenmede’s opinions, which may change after the date of publication. Information gathered from third-party sources is assumed reliable but is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Clients are encouraged to discuss anything they see here of interest with their Glenmede Relationship Manager or tax advisor.