This Advisor Explains Why Smart Planning Starts With Financial Education

The impact of the coronavirus pandemic prompted many Americans to take a closer look at the importance of financial planning. As we look toward brighter days ahead, our financial advisors across the country are here to help clients find financial silver linings and navigate any economic climate.

Below, Derrick Murray, CFP®, a Northwestern Mutual financial advisor based in Atlanta, explains why having a sound financial education will help you build the best plan no matter what is happening in the economy.

What advice did you give to clients who felt unnerved by the stock market volatility when COVID-19 hit?

In March and early April, many of my clients were seeing their accounts take big dips. As the steward of their financial plans, I reassured them that together we would weather the storm. I take pride in being a calm voice for my clients. Stock market volatility can create a lot of anxiety but I explained to my clients that you cannot change your emotions until you change your thoughts. However, I understand their reaction because a lot of the professionals I work with did not have sizable investments during the recession of 2008 to 2009, so this was their first time seeing a real bear market. As we know from studying the markets, this, too, shall pass. It’s not altogether different from other historically volatile times.

As we moved through the year, I worked with clients to take advantage of some positive things that have come out of this pandemic. For instance, many clients are spending less on travel, commuting and other costs. We’ve been able to redirect some of that money to make more progress toward goals that are important to each client.

How often do you find yourself having to be an educator in your role as a financial advisor?

Being an African American who works with mostly African Americans, my goal is to change the narrative when it comes to finances and our community. Financial education is not specifically taught in most schools. I have a passion for being that bridge and filling that gap for my clients. So I lead with education. We cover all the basics: What their debt-to-income ratio should be, how they can determine their earnings potential and what percentage of their income they should be saving.

My clients include medical professionals (dentists, general practitioners, OBGYNs), business owners and executives who are very successful in their fields — but some of them have never learned what an IRA is, what a Roth IRA is or what mutual funds are. They have to learn about life insurance and what disability insurance covers. Many of them are also first-generation affluent, so they haven’t been exposed to essential financial planning strategies. I provide a roadmap for them by helping them explore their options around the best places to put their money and we focus on mitigating their current and future tax exposure within their investments. We start with risk management and work together to build a plan from the ground up with the goal of creating generational wealth.

As we moved through the year, I worked with clients to take advantage of some positive things that have come out of this pandemic.

How have you seen financial conversations change over the past few months?

Several friends have joked with me, saying, “I bet a lot of folks want financial planning now, huh?” What we’re all seeing in the news has made people much more open to financial planning. We are having more conversations about insurance planning and its importance because it’s more top of mind these days. Investing and taking advantage of the down market is also a popular conversation right now, which has prompted several meaningful and even life-changing conversations.

What are some of the biggest mistakes you see Americans making with their money?

A lot of folks are tempted by “get rich quick” ideas. It seems like everyone is looking for an investment that will make them money fast. Building real wealth takes time. It’s great to aspire to success and, if you have a high risk tolerance, by all means, invest — but make sure you put first things first. By that, I mean having taken care of your financial planning basics first, such as making sure you’re contributing to your retirement through a 401(k) or another retirement account, having the right amount of life and disability insurance and building an emergency fund. I do my best to pull my clients back from making unwise investments, and I strive to connect them with resources that will help them build real wealth.

All investments carry some level of risk. No investment strategy can guarantee a profit or protect against loss. This is for informational purposes and not investment advice.

This article is not intended as legal or tax advice. Northwestern Mutual and its financial representatives do not give legal or tax advice. Taxpayers should seek advice regarding their particular circumstances from an independent legal, accounting or tax adviser.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.