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.