“The numbers side of accounting is easy. The people side is hard.”
That’s the lesson David Peters learned from a mentor early in his career, and it’s at the heart of his Surgent CPE course, “How Our Economy and Markets Perform in Election Years.” Contentious campaigns, roiling economic cycles, volatile financial markets and rampant misinformation can send people spiraling into extreme worry over their money.
It’s up to financial professionals to calm their fears with facts.
Tackling Client Concerns
Peters is founder and owner of Peters Financial, LLC, in Richmond, VA. He brings his expertise in tax preparation, financial planning, teaching, writing, research and speaking to this lively, informative course. It’s designed to dispel myths and uncover historical trends around presidential elections and market performance. Armed with these facts, tax professionals and financial planners can respond to the questions of their jittery clients with authority and trustworthy data.
“People are asking you really, really, really hard questions,” Peters said. “What’s going to happen next in the economy? Where should I put my money? What’s the best tax planning technique? That’s a lot, especially when you’re staring at that client across the table.”
The course will debut after the 2024 presidential election, to put election results in the most recent context possible. Continued updates into early 2025 will further refresh the findings and conclusions with up-to-the-minute data.
Why Elections Matter for Accounting and Tax Pros
Nov. 5 was on everyone’s calendar as a momentous day that will decide who occupies the White House for the next four years. However, as Peters will share, Election Day launches more questions and uncertainties, especially when it comes to money, the economy and tax policies.
This course covers the questions that tax professionals and financial advisors hear from clients every four years. Attendees will learn how economic indicators and investments have behaved during past election years, the characteristic phases of economic cycles and how investments perform during each, and how tax policy changes impact the economy.
“If you’re in the financial world, you are about the things that are going on in the economy,” Peters said. “You need to understand what markets do and which parts of the economic cycle are behaving naturally, and which are thrown into chaos because of the election.”
Uncovering Market Trends During Election Years
There’s no crystal ball, and as Peters warned, even a course on the economic impact of elections can’t offer guaranteed predictions. But a data dive into history reveals trends associated with presidential elections and the winners.
For instance, did you know that the “January effect” happens no matter which party wins the White House? That’s the annual bump in stock values early in the year. The reasons aren’t entirely understood, although they could include tax-loss harvesting, consumer sentiment, year-end bonuses and rising year-end report performance. No matter the case, it’s a fact that could provide some assurance to clients nervous about the post-election economy.
Clients might also like to know that stock and bond returns in the first year of any presidency, Republican or Democrat, usually go up. Since Lyndon Johnson was re-elected in 1964, stocks have yielded a 12.34% average rate of return in the president’s first year in office.
“Clients want to know if this is going to continue and whether there’s anything to worry about,” Peters said. “When you’re trying to address those questions, you need to keep an eye on what’s going on today, and you also need an eye toward history and what we’ve seen in the past. Is there any guarantee that things will go this way in the future? No, but it’s basically the best that we as professionals have.”
With its comprehensive look at history from the mid-20th century until recent years, Peters answers questions that every tax professional and financial planner is likely to encounter:
- Where are we in the economic cycle?
- How does inflation react when a new president takes office?
- Is unemployment always a bad thing?
- How do stocks and bonds react in years two, three, and four of a presidency?
- What happens if different parties control the White House and Congress?
- How do tariffs affect the GDP?
- What happens if the Tax Cuts and Jobs Act provisions sunset as planned?
Addressing Client Biases
Of course, spreadsheets can reveal indisputable facts about trends going back decades, but at some point, a person will interpret those trends with their own sets of biases and concerns. Peters ends the course with a discussion on the overarching question of what it all means for practitioners. What do you tell your clients? What can you do right now to put them in a better position?
Peters filters it through a lens of behavioral science, particularly when it comes to finance. Attendees can learn to distinguish their clients’ worries as information-processing biases, or emotional biases.
Information-processing biases can be countered with logic. This course teaches practitioners how to present facts that help clients readjust mistaken beliefs instilled by bias, such as focusing on a single piece of information (anchoring bias), treating money differently according to the emotions its use invokes (mental accounting bias) or believing that a past event was inevitable and even predictable (hindsight bias).
Then there is the bucket of emotional biases, home of overconfidence, inertia and regret aversion, plus the scourge of fears stoked by misinformation and disinformation. While practitioners can correct their clients’ information-processing biases with logic, they can struggle to confront the emotional biases that people attach to their money.
“We can either accommodate it, or we need to do something a little more extreme where we have to be more confrontational,” Peters said. “If somebody’s near retirement and they’re talking about putting their entire 401(k) in cash, that’s substantial. We need to talk about putting the money in something more conservative, but also tell them that cash is probably not a good idea because they’re not going to be able to live the way they currently live and their portfolio isn’t going to keep up with inflation.”
It’s never possible to draw precise conclusions about the future, but building a foundation of knowledge about the impact of past elections and policy developments can help accounting and finance professionals feel more comfortable talking to clients about their intense feelings and fears.
“We’re not going to know everything, but we can talk about it in an intelligent way and a productive way with clients that is going to allow them to make the best decisions in the context that we’re in,” Peters said.
Need to Complete Your CPE Requirements?
Surgent CPE is the premium provider of continuing professional education for accounting and finance professionals who want up-to-date CPE that powers their career goals and fills their toolbox with practical knowledge. To register for “How Our Economy and Markets Perform in Election Years” or to sign up for any of Surgent CPE’s live webinars, on-demand webcasts or self-study courses, check out our comprehensive course catalog. If you’re looking to complete your CPE requirements, consider purchasing the Unlimited Plus CPE Subscription where you will get access to premium content, including exclusive courses that will be held during the Surgent Knowledge Summit.
About the Instructor
David Peters, CFP, CLU, ChFC, CPCU, CGMA, CPA, is founder and owner of Peters Financial, LLC, in Richmond, VA. He is a Surgent Outstanding Discussion Leader and one of the American College of Financial Services 5 Next Generation Financial Services Professionals to Watch. He holds four master’s degrees (yes, four!) and is pursuing a Ph.D. in financial planning. He is active in AICPA and serves on the board of Leadership Metro Richmond.
Note: The content presented is for informational purposes only, is general in nature, and is not intended to and should not be relied upon or construed as financial, investment or estate planning advice. This does not constitute an offer to sell or a solicitation to buy any security, investment or planning product. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. Please consult with a professional to assess your individual situation.
