Mixed Reactions to the Downturn

Questions about the current recession and the best ways to manage money in tough times are proliferating as fast as recommendations given by professionals.

Some are fast to applaud even sporadic better news. Others refuse to acknowledge the good news given the overall nightmare of bad news.

I have heard quite a few mortgage veterans say these are unfortunate times that are not short of once in a life time opportunities for those who know when and how to take on investment risk, or play their cards right.

Judging from survey findings the old saying we all learned in elementary school "Knowledge is power!" holds true especially among investors.

An online "pulse" survey conducted by Certified Financial Planner Board of Standards Inc. shows 78% of the U.S. investors served by certified financial planners "are standing firm" with their existing financial planning strategies.

"In contrast to the many Americans who have reacted to recent market fluctuations with fear and sometimes drastic changes in their financial strategies, individuals who are working with CFP professionals are responding to the same situation with confident and measured approaches," said CFP board CEO, Kevin R. Keller.

"Most clients of CFP professionals are hanging tough in the face of the current financial crisis, with many actually taking advantage of lower stock prices to increase their holdings."

The crisis can pressure investors to be more conservative in their short-term investing goals.

However, according to the CFP board, clients served by the 5,261 CFP professionals who participated in the survey are still confident about their long-term financial goals.

To serve that goal, up to 45% of these clients are moving their assets to lower-risk investments. At the same time, another 40% are taking advantage of the lower stock prices.

Counting on professional assistance when making such decisions also appears to be a trend, "as the turbulence with the economy has increased over the past several weeks," the CFP board said.

Two-thirds of member financial planners said they have seen an increase in demand, with 27% reporting a significant increase and 39% a moderate increase.

"The significant increase in the number of potential clients who have contacted CFP professionals," the executive said, "shows that more Americans are recognizing the value of working with financial planners who are held to rigorous standards of ethics and competence."

More specifically, besides a majority of clients who have responded to the crisis with no changes in strategies, 57% said they favored reviewing their asset allocation.

Up to 48% said their response was by reviewing financial goals, 45% said they would rather move assets to lower-risk positions and 37% said they would rebalance their portfolio.

The bravest in the bunch were the 40% who believe it is time to take advantage of investment opportunities.

As to what actions are most popular among CFP professionals when they decide about their own financial plans, 78% of respondents said they are standing firm with existing strategies.

Only 42% said they are taking advantage of investment opportunities, with 45% moving assets to lower-risk positions, 20% reviewing asset allocation and 13% reviewing financial goals.

And how do they evaluate efforts to save the economy?

Only 11% said they believe the financial system rescue bill will "definitely" improve the economy.

About four out of 10 financial planners or 42% are less optimistic as they think the financial rescue legislation will be "moderately successful in reviving the economy."

One-third said the bill is not the right approach to reviving the economy.

"It also is striking to see the extent to which CFP certificants are taking a cautious wait-and-see attitude when it comes to the financial rescue bill, with relatively few willing to flatly predict that it will be successful in improving the economy," Mr. Keller said.

The CFP board survey also found 46% of financial planners think it will take about two years "for consumers to see a positive impact on their financial situation as a result of the actions taken by the government."

Another 32% of respondents expect the lag to last two to five years, the CFP board said.

Those thinking the crisis will last five to seven years or more than seven years were in a minority at 4% and 2%, respectively, while 16% said they were not sure.

Nearly 72% said the news media's coverage of the current economic uncertainties exaggerates the situation, compared to 1% who said the media downplays the situation.

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