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Guest Contributor: 2020 Foresight

How can financial professionals prepare themselves and their clients for the impact of a consequential election in a turbulent year.

By: Drew Jackson, president of Concorde Investment Services

While the unavoidable and ever-present backdrop of the COVID-19 pandemic has obviously dominated the national conversation over the last six months, 2020 isn’t done making headlines just yet. The November 3rd presidential election is right around the corner. For financial professionals, this presents a remarkable (and, in many ways, historic) challenge: evaluating and responding to the potential impact of a landmark election in the middle of a global pandemic.

Every election in modern history has had an impact on the marketplace. But with high-profile debates and public discussion about some of society’s most fundamental issues on the ballot this year, 2020 feels like it matters more than most. Regardless of who wins in November, the stakes are high and the potential civic and social impact profound.

So what does that mean for financial professionals and their clients? What role will potential election-related volatility play in shaping investment decisions and financial planning strategies in the weeks, months, and years ahead? What should financial professionals be saying and doing as America prepares to vote?

Stay the course

One of the worst mistakes any investor can make is to panic sell or abandon a sound strategy in response to big headlines. Both political parties like to make hay out of any market shifts in the wake of an election, but history has shown that the market tends to perform the same regardless of whether the person with the most votes on November 4th has a D or an R after their name.

There are some clear differences between political perspectives and policy priorities (more on that later), but the big takeaway is that discipline, long-term strategy, and an approach that focuses on controlling what you can control is always the smart play. That’s not just a recipe for greater peace of mind, but for better outcomes. Trying to time the market or making emotional decisions or knee-jerk reactions you might regret later will almost always hurt you in the long run.

Policy, not politics

While the big marketplace outlook might not change much post-election, it is smart to be mindful of any positions or proposed policies that could potentially impact your clients’ portfolios or your own operations. This is an admittedly broad generality, but it is true that Democratic administrations have had a tendency to focus more rigorously on compliance practices in the financial services industry.

In the Obama administration, for example, the Department of Labor was active in working to create new regulatory guidelines and fiduciary standards. All financial professionals should always be responsible when it comes to having their compliance ducks in a row, but a Biden/Harris victory would be a good reminder to make doubly certain that your products, services and due diligence measures are fully updated and optimized.

And, in general, it makes sense to keep informed, and make sure that you are prepared for any politician with a stated position that could have an impact on your products or services—or the investment strategies of your clients.

Preparation, not panic

We understand the value of looking ahead. We know the importance of thoughtful and strategic planning. But we also know not to overreact. None of us would last very long in this business if we overreacted to current events and constantly chased the market. But we do want to pay attention, stay informed, stay engaged, and educate ourselves and our clients.

The ability to remain flexible and responsive while staying true to an underlying strategic vision and avoiding overreaction is a trait shared by all successful advisors. The post-election period is also the right time to engage in the usual end-of-year planning and evaluation process, working with clients to make thoughtful adjustments to their intermediate and long-term plans.

The fourth quarter is also good time to look at realized gains exposure, harvest losses if appropriate, and assess the impact of the election on social security or other social services. Don’t be afraid to have detailed conversations with clients about the potential long-term impact of any social security policy tweaks on future earnings, retirement planning and projected income streams.

November 4th

Be careful not to overreact to any post-election turbulence and turmoil. With COVID-19 posing formidable logistical challenges to voting this year, there is bound to be fallout, regardless of the outcome. A significant percentage of the population won’t be happy in the aftermath of the election, and a period of civic unrest or uncertainty is a real possibility. The good news is that none of that changes what investors and financial professionals need to be doing: controlling what they can, thinking long term, staying disciplined, and making smart and strategic pivots where appropriate.

Finally, regardless of your politics, be sure to vote on November 3rd. We all benefit as financial professionals and as citizens when we take an active and engaged role in participating in the democratic process, and helping to make the consequential decisions that will shape the future of not just our industry—but our nation.

Drew Jackson is president of Concorde Investment Services, a national securities broker-dealer registered with FINRA to solicit securities products in all 50 states and several territories. Drew can be reached at djackson@concordeis.com.

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The views and opinions expressed in the preceding article are those of the author and do not necessarily reflect the views of The DI Wire.