Hospitality/Tech Clients Wanting to Cash Out
If there’s ever been a time that advisors have had to work extrahard to not only communicate with their clients regularly butalso to make sure their clients don’t do anything drastic outof fear, the ongoing pandemic is it. Miye Wire, president ofReston, Virginia-based advisory firm MiyeWire, shared thecases of three clients among the 250 or so families she serves.
They became so worried aboutthe toll the COVID- 19 pandemichad taken on them personally andover the economic downturn thatshe had to convince them not totake drastic steps that would hurtthem for years to come.
The first two were a husbandand wife in their early 30s whobecame clients late last year,recalled Wire, who has been registered with Woodbury FinancialServices (part of Advisor Group)for 20-plus years. She identifiedthem as high earners — not richyet but on their way; the wife isan executive at a well-known hotel company and the husbandworks in software sales for a big technology company.
“They just had a really, really big year. The husband hadmade a lot of money, they were sitting on a bunch of cash, andthen they were expecting their first child in February,” Wirerecalled. They started thinking about college and retirementplanning in 2019 and a member of the husband’s family wasalready a client of Wire’s firm for many years.
He referred the couple to the firm, whose clients are mostly35 to 55 years old living in the Washington, D.C., area andare tax sensitive. After becoming clients, the couple investedall their cash “right around the beginning of January” in amoderately aggressive portfolio that was based in part on theexpectation that the husband would be getting a “big bonus/commission check” in early March, she recalled.
“And then COVID comes along, the market crashes, their babyis born at the end of February, and then the wife, of course, working for a hospitality company, gets furloughed,” Wire said. On topof that, the husband’s company, “which is doing fantastically inthis environment, basically says, it’s ‘going to hold or freeze all ofyour bonus and commission checks,’” she said.
The couple didn’t expect to need the money they had invest-
ed — it was for retirement and the child’s college education.
However, now, Wire pointed out: “The wife’s basically out of a job.
They cut her to 20% of her pay indefinitely,” and the couple real-
ized they were “100% responsible for the life of this other being.”
There were plenty of reasons behind the couple’s sudden
fear, she said. “Between the sleep
deprivation of a newborn, the respon-
sibility, the wife getting furloughed, the
husband not getting a bonus check, the
market tank[ing], and then he was afraid his parents might
need some money because of what’s happening in the econo-
my, … they sent me an email one Friday and were like, ‘OK. We
want to cash out our account by Monday’ or something crazy
like that,” the advisor explained.
She wound up talking them through the situation in lateMarch, she recalled, adding: “It was their first experience inthe market ever really outside of their 401(k)s … I was able totalk them out of selling anything” while the market was down.
The couple “had a small amount of fixed income in theirportfolio, so we just agreed that I would send them that,” Wiresaid. She sent them some money from their bond fund, andconvinced them that would give them “a little bit of security.”
The advisor said she’d check back in a few weeks later.“It’s helped that the market has started to recover a littlebit, [and] they’re kind of feeling more comfortable,” she said,adding that the husband’s parents didn’t need any financialhelp after all.
At the end of the day, Wire explained, “I wanted to make surethey didn’t do anything that they would regret later, just out of fearand emotion — and I think we’re, knock on wood, past that point.”Another example involved a client in his mid-60s who“completely panicked, right at the very beginning” of the pandemic, “before the shutdown even happened,” Wire recalled.
He had been planning to retire. Then one Monday morning,he said he had gone online and cashed out a 401(k) that Wire’sfirm didn’t manage. The advisor had him come to the office. “Isat with him in the office for like an hour talking him down,”she said, noting he had retired from a federal government jobbut then kept working as a contractor for about 10 years.
The “good news” is that the 401(k) he cashed out wasn’t ahuge part of his portfolio, because he didn’t stay with any onecontractor job for more than a year or two after retiring fromhis longtime, full-time government job with a full pension, sheexplained. “We did convince him when he came in on Mondaynot to touch any of his [investments] with us.”
Though he wanted to pull everything out of the individualretirement account he had with her firm, he didn’t move anything after talking with her, the advisor said earlier this year.The client did indeed retire over the summer as planned, andhis portfolio has remained intact.