While the recent events surrounding the banking system failures and potential impact may be concerning, it’s essential to maintain a level head and make informed decisions based on reliable information.
In the wake of the unexpected failure of Silicon Valley Bank and, most recently, Signature Bank, the Fed took an early controversial action by releasing a joint statement from the Federal Reserve, the Department of Treasury, and the FDIC. The statement communicated that all deposit accounts at SVB and Signature Bank are protected, but certain unsecured debtholders will not be protected. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law. (Federal Reserve Board – Joint Statement by Treasury, Federal Reserve, and FDIC, 2023)
While this announcement has eased the immediate concerns, the events have raised additional concerns about the banking system’s overall health and other banks’ stability. As financial advisors and thought leaders in the financial industry, monitoring the situation and providing your clients with updates are essential. The recent events highlight the importance of maintaining a diversified investment portfolio that aligns with an individual’s objectives, time frame, and risk tolerance.
As you weather the storm, here are 3 tips for you, and for you to share with your clients during the current situation:
Avoid making impulsive decisions: It’s natural to want to act and do something to improve your situation when a crisis hits. However, it’s essential to avoid making impulsive decisions that could worsen your situation. Before making any significant financial decisions, take some time to think things through and consider all your options.
Seek professional advice: If you’re an advisor struggling to calm your clients during a financial crisis, it’s a good idea to seek advice from other financial professionals or advisor support providers like us. They can help you understand your options, create a plan for client communications and provide the support you need to get through the crisis. For clients, your reassurance and frequent updates will help put them at ease as the situation plays out.
Stay positive: It’s easy to get caught up in negative thoughts and emotions during times of uncertainty. It’s essential to stay positive and focus on what you can control and do to improve your mental well-being. Surround yourself with positive people and try to find things that make you happy and bring you joy.
Bank failures are a serious issue that can significantly impact the financial system and the economy. While the environment remains fluid and uncertain, staying informed and helping clients make informed decisions based on market trends and developments is vital. Use the links in the reference at the end of this post for an in-depth read about the current financial system status.
As an extension of our client’s team, we’re here to address concerns and guide you as you support your clients through these challenging times. Through careful planning, a long-term perspective, and active communication, we can weather any economic storm that comes our way.
Please contact us to discuss your unique situation and how we can help you.
References
Federal Reserve Board – Joint Statement by Treasury, Federal Reserve, and FDIC. (2023, 03 16). Retrieved from Federal Reserve: https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm
Horsesmouth. (2023, 03 16). Retrieved from HorsesMouth: https://www.horsesmouth.com/bank-failures-and-the-stability-of-the-financial-system?utm_source=SilverpopMailing&utm_medium=email&utm_campaign=DailyOatsNewTemplate+(25)&utm_content=&spMailingID=48097308&spUserID=MTUzMDYwNzUyNTYyMwS2&spJobID=2421791830&spRe