hands reviewing plans

April 30, 2020

Six Wealth Planning Strategies for the COVID-19 Markets

While the coronavirus pandemic continues to wreak havoc on global markets, leaving even those investors who have traditionally made all of the right moves feeling alarmed, experts say now is not the time to panic. It is the time to focus.

“We can't control what's going on in the market, but we as investors are not completely powerless," said Angie O'Leary, head of wealth planning at RBC Wealth Management-U.S. “There are things we can do to strengthen our financial health in a down market."

In fact, financial markets typically experience a ten to 20 percent correction roughly every one to two years, with the most recent occurring in late 2018 and early 2019, and markets have eventually recovered lost ground each time and moved to new heights.

Because long-term success hinges on the way investors react during periods of decline, however, it is critical investors take deliberate steps that can further long-term goals.

Consider these six important strategies that may make sense for you and your portfolio during market turbulence.

Revisit your wealth plan with your financial advisor.

Even if you have a solid plan, you should be prepared for your net worth to take a hit, depending on your asset allocation.

But as long as you stay invested, the loss is merely a paper loss, and doesn't become a realized loss until you sell.

Need to discuss your wealth plan with an advisor and wish to find one? Get in touch with a City National Advisor today.

Consider opportunities within your portfolio to tactically harvest losses for tax purposes.

This can be especially impactful if you have realized gains, or if you see an opportunity to trade up in quality, growth potential or to better align your portfolio with your personal values.

Retirees and near-retirees should conduct an income check-up and revisit spending priorities.

Consider a liquidity plan that includes access to credit and lending.

If you are unable to tap into your other sources of funds because they are more illiquid or inaccessible, your liquidity plan can be a vital safety net.

Consider a Roth IRA conversion.

The drop in portfolio values and potential lower personal income for 2020 - along with the elimination of the stretch IRA - make a Roth conversion a consideration for many people.

Your financial advisor can help you assess if this strategy is right for you.

Lower your tax bill through charitable contributions to organizations.

A growing number are in desperate need of funding, as many of the avenues they normally rely on, such as conferences or events, have been cancelled or postponed in the wake of the spread of COVID-19.

Look at your estate value.

Consider timely strategies that work well in down markets, such as annual gifting using depressed stock, or trust strategies, such as a Grantor Retained Annuity Trust.

Here's the bottom line.

Don't jeopardize your long-term investment strategy out of fear.

Instead of making knee-jerk reactions, investors could reconsider their long-term plans, which might include:

  • Reviewing your long-term goals as opposed to changing them. History tells us that recoveries happen and the best offense is a good defense that holds the line.

  • Tracking cash flow. Now is the time to remain calm and focus on the details of your plan, not on the markets.

  • Recalling how financial markets have experienced many corrections in the past, and how not even the global Spanish flu pandemic in 1918 could take out the global markets. Just as markets have recovered in the past, this too shall pass.

If you've created a strategy that reflects your risk tolerance, time horizon and financial goals, and you make the relevant adjustments over time, you'll give yourself the ability to look past today's headlines.

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete.

Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. City National, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations and readers should seek professional advice.

This article is a republication of content originally published by RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC. © 2020, Royal Bank of Canada, used with permission. This article may not be reproduced, distributed or further published by any person without the written consent of RBC Wealth Management. Please cite source when quoting.