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“How to advise Clients with a Covid-19 Cash Crisis”

According to an Ipsos poll commissioned by MNP and published on June 22, 46% of Canadian’s work situation has been affected by the pandemic. Personal incomes and businesses have been dramatically affected.

On the other hand, the dominant narrative from Canadian governments and media is that we are progressing well through stages toward opening and normalization of the economy. 

Many of us seem to be talking as if the Covid-19 crisis is over. We are thinking about summer off-time and then ramping up for the Fall.  We will need to do some planning. Q4 will be critical in what has been an unusual year. 

I participate in a number of online forums and zoom groups like this one, and attendance has gradually fallen off this summer. People seem relaxed, withdrawn, and want to enjoy the rest of the summer. I am grateful that organizers are really working hard at keeping people coming out to online work-related events.

With some of my clients, I am discussing mortgage financing and emerging real estate opportunities and historic, low interest rates. Things are great for those who have uninterrupted income and assets. Real estate sales for June were just fine, given the times we are in. I am starting to receive calls from people who promised to take the summer away from real estate, mortgages, and business financing. They are getting back to their interest in financing or refinancing real estate and businesses. They want those low rates!

According to the Conference Board of Canada, Canadian consumer confidence has rebounded to approximately two-thirds of it’s pre-pandemic level. People are cautious but impatient to get on with their lives. Confidence is mostly improving although affected by the headlines, whether people have good resources and safety nets, and a sense of personal vulnerability to the pandemic. 

For me, calls are coming in and I am having pleasant, strategic conversations about the low rates and opportunities for financing or refinancing real estate and businesses. The best retail interest rates are down around 2%. There are commercial interest rates that are much lower than that available to high-quality companies. Most other interest rates are also lower. The exceptions are, of course, credit card rates which have already climbed back up after being reduced in March and April. These borrowed funds should be moving to lower-interest rate vehicles. Contact me if you need help with doing this.  

I am having another set of conversations with another group of good people. For many company owners, managers, and homeowners, 2020 is the most serious financial crisis of their lives. 

Anyone who owns or works for restaurants. Anyone who owns or works for businesses is in deep trouble. Contract workers, freelancers, people new to the workforce, people new to Canada, those caught between jobs, small business owners, and lay off victims are in trouble. Thousands of travel and tourism people are in trouble. Oil and gas workers were already in trouble before the Pandemic started. Government and corporate employees and contractors have been most comfortable but revenue is down and debt loads are high. Large-employer staff and contractor cutbacks will eventually make their way onto the agenda. 

The Canadian government’s response was quick. The Canada Emergency Response Benefit (CERB) program has worked well. Other financial benefits and lending programs are having various degrees of success in sustaining Canadians. 

These programs are generous but insufficient. They are scheduled to end. Many individuals and businesses do not qualify and even with assistance, some are using financial reserves, credit lines and cards in order to maintain themselves. For these friends and neighbours, the trouble is just starting.

The good news is that with the right tools we can help. The first tool that we need is a strong sense of objectivity and professionalism. Many financial professionals display a sort of professional cheerfulness that may not be appropriate in a time of financial stress. Others are cynical and cranky and this may also not be helpful.

Financial professionals often are biased toward the straight and narrow. We are proud of high credit ratings. We pay bills on time, have zero balance credit cards and healthy RRSP accounts, and low interest rate mortgages or no mortgages at all! We love challenging, well-paid work and enjoy financial security. On the other hand, I know a CPA who is an incredible risk-taker. He likes financial excitement.

Whatever our personal inclinations, we need to be objective and professional. Our demeanour and approach need to be shaped by professional standards and what the client requires of us. The tendency all of us have is to judge those different from ourselves, especially those with differing financial experiences, attitudes, and successes. We may be liberal in many ways and then be completely rigid when it comes to finance.    

A second tool that we need to have at hand is knowledge. Most of us know the rules and regulations. We took the courses and know what to do when things are on track. Do we know what to do when the train goes off the rails? 

For example, do we know what advice to give when someone has $4,000 available this month and $5,000 in bills coming due?  Do we know what questions to ask before giving the advice?

Do we know the implications of missed or NSF payments? What if a mortgage matures and your friend or client fails to pay out or respond to the renewal offer/turndown? Do we understand the various forms of tax arrears and how these are addressed by various levels of government? Do we know what the regulatory bodies and professional educators are not allowed to tell us?

On the revenue side, do we have ideas about quick ways to boost income? Do we know marketing and salespeople who can help?

Do we know the right people? The right accountants, lawyers, mortgage brokers, insurance people, and other professionals who can discreetly help a client or friend in distress.

Much of what we need to know or who we need to know when a business or individual is in difficulty is not written down anywhere. We cannot advise someone not to pay a bill. We certainly cannot tell someone to postpone paying their taxes. We cannot tell someone to not return a phone call or answer a letter. In financial services, there are things that we talk about and other things we do not talk about. It is important to know the difference.

The third tool has to do with practical application. This is where most financial professionals believe they excel, but this requires the first two tools to be in place. If we lack empathy for the circumstances of someone in financial distress we won’t get the story right and might make mistakes with our advice. Likewise, if we don’t know the right people and the right information we will offer a practical solution, but it may be the wrong practical solution.

Practical tips:

Do a brief SWOT Analysis

Quickly create or implement a crisis plan.

Address both the expense and income columns. Financial professionals are often biased toward the spending column and tend to neglect the income column.

Consider both short-term and long-term. In a crisis, our vision narrows and we have trouble seeing around the next corner.

Our projections and solutions should be easily understood by any reasonable person. In a crisis, complex solutions will be misunderstood and misapplied.

Look past the current financial news stories. If we depend on the news story of the day, our solution will collapse when the story changes.

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