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Financial planners are in a position to see first-hand the effects the Sept. 11 terrorist attacks and subsequent bioterrorist acts are having on the way people view their finances.

After Sept. 11 people want to get their affairs in order, says James Cotto, managing director, Cotto and Padovani Financial Strategies Group of First Union Securities, White Plains, N.Y.

“You see a lot more of that than before 9-11 with trusts and insurance,” he says. “Theres just more of a financial planning approach and less interest in day-to-day trading.”

Theres a heightened interest in insurance quotes, as well as home equity loans “in case they lose their jobs, and if theyre investing, theyre taking a long-term approach,” Cotto says.

Many clients are also more patient with the fluctuations of the equities market than before Sept. 11, Cotto says.

Although many were frustrated by the poor performance of their stocks before the attacks, they arent rushing to sell now, even though volatility continues to define the market.

“Now you can see that as crazy as the equities market is, theyre not making emotional decisions,” Cotto says.

Citing concerns about what impact bioterrorism and the current unpredictable state of the airline industry could have on their portfolios, many of Cottos clients are anxious to let go of the reins of their financial plans and allow him to help make decisions regarding mutual funds and trading.

“And thats encouraging,” he says.

Michael Bonevento, senior financial advisor in the Wall Township, N.J., American Express office, says hes proud of the way his clients have reacted to the changing economic environment after the terrorist attacks which is not to react at all.

Bonevento explained to his clients that economies tend to “get a boost after events like these, so its an opportunity to buy investments. And theyve been very well rewarded as a result.”

Bonevento says that clients who have taken his investment advice after the attacks have seen their stocks increase 20% in value and more.

Boneventos clients typically wait for the market to dip, then buy, which is what they continued to do after the attacks.

“I didnt get panicking,” he says. “Panicking and emotion dont equal good decisions, my clients called and we talked about using the environment as a catalyst to improve things in their portfolio rather than running scared.

“Ive been thrilled with the way my clients responded. They either sat still and did nothing or used the environment to go forward. No one insisted I sell or run to cash or bonds.”

Aaron Saperstein believes people should make money while protecting themselves against potential losses. He believes this strategy has helped his clients stay the course throughout the current political and economic uncertainty.

The senior vice president of Saperstein and Shack investment Group of First Union Securities, Greenwich, Conn., says good defensive strategies are key in avoiding the panic that can set in when equities take a significant downturn. A healthy defense strategy includes proper asset allocation among stocks, bonds and cash.

“People need to remember they can be insulated during the bad times, in the drops in the market with good diversification,” Saperstein says.

“When theres a lot of uncertainty and volatility its difficult being involved in the market if you dont have a strategy for the long term. People should take 9-11 and do a complete self-assessment.”

Mike Kelley, a senior financial planner with Metlife Securities, New York, says his clients did not rush to buy protection products after Sept. 11 because those investments were already in place.

Many of his clients contacted him to discuss the events and the potential impact to their finances, but none changed objectives.

“As their planner Ive reminded them of whatever their short- and long-term objectives are, and that they certainly should stay the course,” Kelley says.

“One of the things we were able to point out after 9-11 was that there really wasnt panic in the market and that was very demonstrable to them.”

A survey of more than 600 people taken one month after the attacks supports this idea. The findings suggest that while some people did make knee-jerk reactions to the Sept. 11 events, many are taking a wait-and-see approach.

According to the survey, released Nov. 14 by the Northwestern Mutual Financial Network, Milwaukee, and Harris Interactive, Rochester, N.Y., 70% of respondents remain fairly confident about their financial situation, and more than 90% think their households financial situation will either stay the same or improve in the next six months.

However, the survey also shows that 80% of respondents are concerned about their investment approach and one in four are rethinking their retirement plans following Sept. 11.

The survey findings suggest that although people in general are not taking extreme actions to safeguard their wealth, they do have some anxiety about the future.

Twenty-four percent said theyve prepared a will since Sept. 11 and another 38% are considering it. Ten percent have sought financial advice from a professional and an additional 16% say their need for financial counsel has increased.

One third of respondents made changes to their investment portfolio, with 16% buying more stocks at a lower price and 8% purchasing more mutual funds; 21% spent less and/or saved more, and an additional 39% think they also will do that; 10% kept more cash on hand and 27% think theyll follow suit; 8% purchased or increased disability insurance and 6% bought or increased their life insurance; 5% sold stocks.

Nearly 30% said they have been forced to rethink their retirement plans. Among them: 11% are considering working longer; 11% are changing their 401(k) strategy; 8% are seeking additional guidance from a financial advisor; 5% are reevaluating their estate planning; 8% are doing something else.

If people are stocking up on protection products, its news to Kris Dunn, public affairs specialist, State Farm, Bloomington, Ill. She says sales of life insurance have not increased after Sept. 11.

Dunn attributes the lack of panic among State Farm clients to the companys emphasis on long-term planning, its choice of funds and the management of those securities.

“All of the securities were selected for their long-term investment potential, that goes with the caveat that you cant predict whats going to happen, but our agents focus on long term,” Dunn says.

In order to respond to anticipated fears, State Farm gave its agents materials to share with their clients on how financial markets recovered after earlier tragedies, including Pearl Harbor, the Kennedy assassination and the 1993 terrorist attack on New Yorks World Trade Center. But those materials have been largely superfluous.

“We do prepare our agents for those questions, but it hasnt been a concern for [their clients.]“


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 19, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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