The Impact of a Global Pandemic on Wealth Planning
The COVID-19 pandemic has impacted multiple areas of our everyday lives, including finance and wealth planning. Sudden and challenging circumstances across the globe have made adaptation and resilience key for businesses and households alike.
The impact of the global pandemic on financial planning and wealth management is multifaceted and complex. For individual households, changes vary according to demographics, though not necessarily in a clear way.
Financial Planning & Wealth Management Considerations
A definitive split exists between the North and South of England in terms of spending, saving and wealth planning. Meanwhile, the overall effects on income tend to be mixed (particularly in urban areas). Other factors affecting household income include:
- The ability of businesses to adapt quickly (digital capability), resulting in an increased need for government support , particularly for those in already-disadvantaged areas with less capacity to
- Changing health needs, particularly for people directly affected by the COVID-19 virus, as well as those struggling with the mental and emotional fallout of the pandemic.
While measures such as furlough and social security have both helped stabilise income retention to an extent, inequality is a key factor in people’s ability to plan wealth management, with a range of studies indicating that black and minority ethnic, lower wage and young worker incomes have all been more severely affected overall.
Overall, there has been a significant drop in household consumption, as lockdowns indirectly encouraged more people to spend less. Spending habits also shifted away from non-essential items (particularly during lockdowns), according to changing financial circumstances and shifting personal priorities: yet another example of how the pandemic has affected multiple areas of everyday life.
Trends in household savings have seen another geographical split, while households in the Greater South East tend to benefit more from “COVID savings”, those in disadvantaged areas (i.e. areas where there is social housing) are less able to save. Spending is a key determinant of economic growth, but instability and uncertainty of the future resulted in hesitancy from those with savings to spend them.
A recurring theme throughout the pandemic has been one of uncertainty. Beyond the behaviour of the virus itself, this has extended into the habits of investors both large and small-scale. Stronger relationships between advisors and risk-averse older clients have led to greater potential for wealth management retirement planning. Meanwhile, the market has also seen a surprising influx of (more risk-tolerant) younger investors engaging in personal wealth planning.
What is personal financial planning and wealth management? The first relates to a term encompassing elements of personal money management, saving and investing. The second regards the protection and structure of wealth using financial services.
For policymakers, safeguarding the future of wealth management post-COVID relates to adapting financial policies and to effectively use forecasting and planning to mitigate uncertainty. Similarly, while 100% certainty cannot be guaranteed, investors can also benefit from effective contingency planning. This extends to insurers, who now need to adapt their products according to the changing needs of their clients.
Adapting & Evolving Your Wealth Planning
The pandemic has necessitated a shift in the way we do things across the board, extending to finance. While the sector still faces considerable uncertainty, effective planning and flexibility (from policymakers, financial institutions and individual investors engaging in family wealth planning) can help mitigate this and improve potential for future stability.
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