How the Pandemic Has Impacted the Economy, Finances, Savings, Spending, and Our Approach to Financial Planning
Amy Braun-Bostich was recently quoted in two GOBankingRates articles, “The Financial Impacts of COVID-19 That We Weren’t Expecting” and “What Americans’ Savings Look Like 1 Year Into the Pandemic”, and wrote this blog post as a follow-up piece with her full thoughts:
The pandemic has accelerated several developing themes for consumer purchases and behavior, such as online meetings using applications like Zoom, curbside pickup of groceries, online ordering of prepared meals, fitness at home such as Peloton, The Mirror, Tonal, etc., traveling by RV, and home delivery of all sorts of goods.
In many of these cases, demand was so great that production could not keep up. Antibiotic wipes and cleaners, toilet paper, and other cleaning supplies could not be found anywhere. Masks became mandatory and now there are so many kinds and designs. Flu season came and went without a whimper and masks may stay around even after the pandemic for that reason.
Families were not allowed to be with loved ones in the hospital and funerals were small. People used Facetime and other video chat applications to communicate with friends and family.
We saw a slowdown in auto purchases, retail sales (especially fashion and home goods), dining, and travel. The leisure industry, comprised of air, cruise, rail, and bus travel, and concurrently hospitality, was the worst hit. Travel agents, waitresses, bartenders, janitors, hair salons, gyms, and airline and hotel staff comprise 20% of the working population and were unemployed the quickest and the longest – many still are. Many are dependent on unemployment, eviction postponement, and government-supplied medical to exist. Grocery store workers, manufacturing and factory workers were still required to go to work in sometimes unsafe situations. Partitions dividing people in workplaces may still exist post-pandemic.
State and local governments became woefully pinched as the cost of the pandemic mounted while the tax receipts from personal income tax fell.
It became extremely apparent that relying on foreign countries for pharmaceutical manufacturing, medical supply manufacturing, and other necessary supply chains may pose a national security risk.
Real estate in urban areas was eschewed for more rural and suburban lifestyles, and the need for commercial real estate was questioned by certain companies. Landlords became underfunded on properties as evictions were stopped by the federal government. Mortgages were also showing signs of stress.
More than 400,000 businesses went out of business and many more may follow. The slowdown impacted small gas and oil drillers, and many have consolidated with larger firms with deeper pockets. Stadiums were left empty, and sports upended. Education will never be the same, as poorer children without the internet fell even further behind.
Hospitals flush with COVID-19 patients lost money because of the reduction in elective surgeries. The estimate is that hospitals collectively lost $122 billion in 2020. Front line workers, nurses, doctors and EMT workers had to put their lives on the line to help save others. Many of them fell ill.
People spent less on dining, entertainment, sports, travel, and gasoline. There is now a broad-based awareness of how much money had been spent on unnecessary items – especially true with dining out.
Some of our older clients are questioning the need for two cars and the cost associated with them even though they can afford it. Several other clients are buying new cars. Many clients are completing remodel projects, and several clients acquired dogs and new pets. Most are still gifting to charity and causes surrounding children.
Most of our clients miss visiting family and traveling more than anything. I think it is reasonable to expect traveling will continue and accelerate post-pandemic. And although most of our clients are already family-centric, the pandemic has made them have an even stronger appreciation of family.
The savings rate has accelerated as the unknown consequences of the pandemic made people fearful. Most of our clients are building larger cash reserves without trying, and most want to keep them higher for unexpected issues. Oddly, risk tolerance has not changed though, especially as the stock market rebounded. Some of our clients have even expressed interest in gold, silver, and cryptocurrencies.
The pandemic also exposed weaknesses in our systems and rushed along the demise of already dying practices and firms. At a time when more people relied on the USPS mail system than ever, it slowed down. Social Media was exposed for the harm it can do in floating misinformation. Some industries in leisure may normalize, for example, cruise lines. Even with robust future bookings, masks will be required, tables more spaced, and pre-cruise COVID-19 tests required. It looks like some of these practices may stick. Airlines may insist on preflight COVID-19 tests as well – some are already doing it.
I think it may be safe to bet that home fitness, contactless delivery, in-home meal prep kits, reduced business travel and reduced international travel will be with us for a long time. Retail shopping as we know it may be dead. Commercial real estate may be under pressure for years to come. Internet investing, banking and finance will occupy a larger share of the market.
In terms of how we approach financial planning at Braun-Bostich, the pandemic has forced us to rely on technology more, refine our processes, and develop stronger workflows. Overall, it has made us a stronger team, and clients have not suffered a lack of or a slowdown in service. We rely on Zoom for meetings with clients. We have added to our previous tech stack to enable better communication between teammates (Microsoft Teams) and more personalized client email communications through Levitate. Microsoft Teams has been helpful for chatting, sharing documents, and holding staff meetings.
We have a server that is accessible from anywhere through our private VPN, through which we can access client and company digital files. Our phones are VOIP so we can transfer calls to any staff member no matter where they reside. We can also use a Bria app to call clients using our cell phones and it looks like it’s coming from the office. We also have a texting app that stores messages on our Client Relationship Manager software.
Our Portfolio Management System, Orion, and its client portal, ADVIZR, allow for safer transfer of documents to and from clients. Most of the software we use is online.
One thing the pandemic has not changed is the need for human contact and meetings. Clients want to see us, and synergy between staff members flows more readily in person. Although we do not actually need all the office space we have, we will not be downsizing any time soon. People need in-person interaction.
While the pandemic has drastically shifted the economy, finances, savings and spending habits, and our approach to financial planning, not all of it has been bad, and we continue to try to look on the bright side – and help our clients do the same.
- Amy Braun-Bostich, CEO of Braun-Bostich & Associates
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