Note: This article was first published on FT.com, May 15th 2020. View article on FT.com fdfdfdf

Black swan events come along periodically. My job as a wealth manager is to prepare my clients, as much as possible, for the unexpected.

As we become more accustomed to the lockdown, dragging out paperwork, having a reality check and adapting financial plans is activity many of us are already undertaking.

Here are seven areas that people should either be considering, actioning or have already concluded.

Access to cash

Cash is king, as my father has always said — although contactless payments have taken precedence in the shops. But access to liquid funds is vital at times like these. The fundamental key to financial planning is making sure you have enough short term liquidity.

So-called black swan events (think the dotcom crash, the global financial crisis) have a nasty habit of cropping up. For my clients, typically holding between one to three years’ expenditure in cash is the norm.

Currently, we have an interesting situation as most people’s expenditure has dropped during the pandemic — something that doesn’t usually happen with black swan events.

Make a plan — and stick to it

Look at your financial plan. Did you have one? If not, now is the time to start. What do you most want to achieve financially — early retirement, comfortable retirement or passing on wealth? Whatever it is, write it down and then start to work out how to achieve it.

If you have a plan, like my clients, stick to it. Of course, amend plans when circumstances dictate, but stick to the fundamentals.

Timing markets is impossible — so don’t try to. Invest and hold, if it is the plan and if it is the right thing for you to do. If you planned to top up your Isa by £20,000 this tax year, rather than trying to time the market, just stick to the plan — invest and forget.

Pensions questions Pensions are my favourite subject (well, it’s kept me in a job for 20 years). Look at where you have invested your funds. Often you ticked some boxes on your first day in a job, then never looked at them again. Have you ever asked whether the risk you’re taking is appropriate? Also, look at the charges — what do you need to achieve each year to cover these?

You may have received a final salary transfer valuation earlier this year or be thinking of getting one. As always, look into this very carefully. Yes, you will be moving money into the market at a lower level and perhaps that transfer quote you received two months ago is now theoretically 20 per cent higher due to market movements. But the actuary who produced this figure was not doing so to help you out.

They have a duty to protect the scheme and other members. Never let anyone tell you a final salary transfer is a “no brainer”. It is a “massive brainer”, which is evidenced if you have ever been at a dinner party with an actuary. In fact, you only have to ask those that transferred over the past 18 months to see how much of a brainer it really is.

Protection

Forgive me for bringing this up, but even before the pandemic, financial advisers have urged their clients to look at protection. What would happen to you or your family’s finances should illness or death occur? Having a plan is important, but protecting the plan is vital. So review your current insurance cover (you may have policies through your workplace as well as personal cover).

See whether you have enough income replacement, critical illness and life cover. There is little you can do to change this under the current situation, but make sure you refer back to it when it is possible to remedy.

Tackle ‘life admin’

Lockdown is the perfect time to tackle the things we never find time for. Have you made a will and is it still up to date? The same applies to power of attorney agreements. Every pension you hold will have an expression of wish form (pensions death benefit) — again, usually something you fill in on the first day of a new job and then forget about.

More generally, what state are your finances in? If your paperwork is in disarray, imagine how bad it would be for your family to resolve if you are no longer around. Life admin is a chore — but the admin following a death is an enormous burden at a time of emotional distress.

Rethinking income

I recently had a Zoom call (a phrase that would have meant nothing two months ago) with my friend Caroline. Instead of the dividend cheques she usually receives, there have been letters informing her dividends have been suspended.

For those that take a “natural income” from their investments, these are particularly difficult times. You essentially have four options.

First, you can spend your capital (the “natural yielder” will find this sacrilege). You could seek other options which still pay a dividend or have a high yield — but you must question how risky these are and how long the income might last (and if dividends are cut, the share price will drop thus compounding the error).

Alternatively, move to a growth strategy (don’t forget your capital gains tax allowance to do this as tax-efficiently as possible) or target a total return — let a fund make the investment decisions about growth or income and spend it as it comes.

For many, the fourth and final option of “sit it out” will make the most sense. In any case, your income needs this year may have fallen due to the lack of things to spend your money on, such as foreign holidays. Based on what you’re spending now, what are your monthly income needs? For Caroline, the difference was a pair of shoes that stay on the shelf somewhere — so not too bad.

To protect your income strategy in future, make sure you have diversified investments and perhaps more crucially, diversify your strategies. Use different strategies in different tax wrappers within one overarching plan.

Be prepared to be flexible

In conclusion, don’t just accept the weaknesses in your plan — embrace them and think of ways to amend them. You will then be in a much stronger position to weather the next crisis (whatever that may be).

The most important aspect of financial plans is that they have to be adaptable. Sometimes you put money into the plan, sometimes you take money out (which is why you don’t put all your money in pensions).

When you take money back, you need to think through the implications — taking £20,000 cash out today means £20,000 less invested, impacting investment returns for many years into the future. In turn, this could push out your plans to retire at 60.

Plans are made to be reviewed, but the crucial thing is to make sure you put aside enough cash when times are good, so you don’t have to raise cash at the worst possible moment when times are bad.