‘Don’t panic!’ What tax pros are telling clients about recession


We’re in a recession. We’re not in a recession. We’re about to be in a recession.

These are not phrases to toss around to keep clients calm. How nervous are clients now — and what’s the best way to advise them?

“Get ready, be prepared, don’t panic,” said Benjamin Bohlmann, a CPA and partner in the Miami office of Top 100 Firm Friedman LLP (which is expected to merge into Marcum this summer). “We’re communicating more than ever, we’re retooling projections under alternative scenarios, we’re designing multiple contingency plans.”

Two consecutive quarters of declining GDP numbers have deepened recession worries as inflation surges and labor shortages and supply chain disruptions continue.

What kind of client wouldn’t be nervous? 

“Not much to do here except to tell them to save, reduce expenses where possible and to increase their prices or fees,” said Dan Henn, a CPA in Rockledge, Florida.

“We’re reiterating to our business clients that they must raise their prices,” added Gail Rosen, a CPA in Martinsville, New Jersey. “If they’re paying more for salaries and expenses, then their prices must reflect that or else the bottom line is that it comes out of the owner’s profits.”

Make sure what’s affected

“Our construction clients are suffering the most due to bids they make,” Rosen said, “and the ongoing rising cost of materials by the time they order for the customer.”

Rob Seltzer, a CPA at Seltzer Business Management in Los Angeles, said that as almost all of his clients are in the entertainment industry, “we haven’t really had discussions about inflation or a recession,” he said. “Their income is not as dependent on economic cycles as it is on how much prior success they have had or how hot they are.”

“The one issue that has been discussed is the increase in interest rates,” Seltzer added. “I have recommended that my clients pause before buying a home right now. My feeling is that, at least in the LA area, the increase in rates has not been properly reflected in a decrease in real estate prices. I know that a major reason for this situation is the low number of properties in inventory.”

Another worry spot for clients: Wall Street. “As a result of the significant inflation we are seeing and talk of a possible recession, clients are experiencing significant capital losses in their portfolios,” said James McGrory, a CPA and tax partner at Top 100 Firm Armanino LLP in Philadelphia. “We haven’t seen this level of losses in several years.  This will surely be one of those years when loss harvesting comes to the forefront for year-end tax planning.”

“Equities have the best chance to keep up with inflation over the long term, even with the recent rise in interest rates,” said Bruce Primeau, a CPA and president of Summit Wealth Advocates, in Prior Lake, Minnesota. ”We expect the Federal Reserve to continue to increase rates until they see some progress in bringing down the inflation rate. Of course, this uncertainty is unnerving for the equity markets, but current rates are still well below historic levels and it will take some time for the higher rates to work their way through the financial markets.

“For new clients coming to us with cash to invest, we are recommending they dollar cost average that cash into the markets, given the volatility we’ve been seeing and will likely see throughout the remainder of the year,” Primeau said. “For those with established portfolios, we’re recommending they stay the course with their asset allocation since it was developed as a long-term strategy. We also recommend they continue to contribute to their portfolios, just as they have been, since they get an opportunity to buy stocks and bonds on sale.”

Break on through

Summit Wealth has another piece of advice for clients right now.

“If you live long enough, you’ll likely live through several recessions,” Primeau said. “It’s certainly not the end of the world and shouldn’t cause you to change the way you save towards your financial goals. Sometimes recessions are necessary to cool off markets that have simply been running way too hot for way too long, like the housing market.”

“Inflation is here, it will be here for a while,” Bohlmann added. “It will decrease, probably, but not go away. We barely remember the last recession, but we may already be in the next one. This too shall pass and we’re partnering with our clients to make sure they prosper on the other side.”

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