| TIMES RECORD - September 7, 2008 - By Ben Boulden
Three local financial advisers — David Craig of Paul Manners & Associates, Carolyn Philpot of Beall Barclay Wealth Management and Kenneth Siebenmorgen of Ameriprise — all agree that in most cases long-term investments for retirement or a child’s college education should not be touched despite a sagging national economy and rising prices.
Differing percentages of each adviser’s client base have expressed anxiety about inflation, market jitters or qualms about the state of the national economy.
Philpot said about 15 to 20 percent of all her clients and more than half of the individuals and families she advises have said they have worries about the economy.
For Siebenmorgen, it’s about 25 percent, and for Craig, 5 percent.
Many of Siebenmorgen’s clients are in their 50s and 60s, have seen several business cycles through with downturns and don’t spook too easily, Siebenmorgen said.
“The main thing is not to panic and keep a cool head,” Philpo said. “I see some clients reacting to a CNBC news story. They feel they have sell that day or buy that day. That’s usually the wrong place to go and the wrong thing to do. They just need to come in and bounce ideas of an adviser and work out a strategy.”
Most clients really aren’t experiencing true threats to their retirement or investment portfolios, Philpot said. It’s a perceived threat.
She said retirees on fixed incomes, even with good incomes, are feeling financial pressure the most in the costs of medical care, groceries and energy.
Perceived or real, Philpot said most of her non-business clients are “high net-worth” or middle to upper-middle class in income. The middle-class clients generally are seeking a higher return on their investments and want to know that those investments are secure and will last.
The biggest mistake they make is trying to keep too much money liquid in certificates of deposit.
Instead, she’s encouraging them to put money into real estate investment trusts that are privately traded and include commercial properties that haven’t been greatly affected by the subprime lending crisis, she said.
REITs can tie up invested money for four to six years at a time, but they’re secure, solid places to put money, Philpot said.
Siebenmorgen said he also is recommending investment in REITs and preferred stocks right now.
“It is different (from the advice of two years ago) because the recession that was expected to hit in 2008 probably will hit in 2009,” he said. “Generally in a recession, financial markets struggle but income from REITs and preferred stocks will continue to come in even if the economy struggles.”
Refinancing debt or consolidating it into a home equity loan also is something Siebenmorgen said he advises.
Because employers often reduce or eliminate bonuses and overtime pay in a down economy, people in the working world should try to build up their cash reserves to rely on if earned income ends up reduced, he said.
Craig said he recommends someone save as much as 10 percent of his or her income and the equivalent of about six months of salary in liquid savings.
With some household budgets straining to pay higher food costs or gasoline bills, it may be tempting to sell some stocks or bonds, but it’s not wise to yield to temptation, Craig said.
“This is not a selling market,” he said. “A client called and said they needed to raise some money. I said, ‘This is about the worst time you could have phoned to do that. You’re selling at a garage sale.’ It’s not a good thing to do.”
If a parent is saving money to help pay for a child’s education, then it’s important to keep doing that and even increase contributions if possible.
Craig said although he’ll move money from out of one economic sector and into another one like energy, he doesn’t shift stocks and bonds much.
A recession or lackluster economy can be good for at least one business though — financial advice.
“Honestly, this is probably when I gain the most new clients,” he said. “I’ve never lost one in a downturn. Generally, this is when people who think they can do it by themselves really do seek help. It’s a hand-holding thing even with the new clients. It’s a doctor-patient relationship.”
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