Karin Alvarado of New Aspect Financial Services.
Despite challenges posed by the ongoing trade war with China, along with wildfires and other climate change related problems, the Napa Valley, California, area had been doing just fine for the most part thanks to the strong tourism industry driven by local wineries, according to Karin Alvarado, a managing partner and financial advisor at boutique hybrid financial services firm New Aspect Financial Services.
But then came the COVID-19 pandemic, noted the advisor, an immigrant from Mexico City, who has been an independent advisor since 2010 and who helped Napa-based New Aspect, a firm with about $450 million in assets under management, spin off from Stark Miller Financial Benefits Group.
"There has been zero tourism" in the area since California locked down in March, she told ThinkAdvisor, adding: "Literally, our Valley went from thriving one day to ghost town and crickets. The wineries closed. The restaurants closed. All businesses closed."
Although businesses were "starting to reopen slowly," including some restaurants, that did not yet include wineries when ThinkAdvisor interviewed her by phone in early June. People were afraid to travel, so many tourists canceled trips to Napa Valley, she said. The wineries are the big tourism draw in Napa, she noted, calling it "the Adult Disneyland."
Pointing out that her firm, affiliated with Advisor Group's Woodbury Financial Services on both the broker-dealer and RIA sides, specializes in retirement planning, she noted that it serves 55 businesses throughout Napa Valley and the Northern California area.
Her firm also has a private wealth management operation that serves about 200 households. Both sides of her firm's business have been affected by the pandemic, she said.
Of the 55 business clients, about 80% were affected in some way, including her nearly 20 winery clients, she said, adding her firm also has as clients seven nonprofit organizations that have been hit hard by COVID-19.
The Worried Winery Owner
One of the largest wineries her firm serves especially impacted by the pandemic, she said, noting it has about 270 employees and has been a client of hers for about 10 years.
The owner, who is in his late 60s, contacted the firm "very stressed out in early April," asking why there was no stop-loss solution in 401(k) plans, she recalled, noting his wife is also a personal client of her firm.
"We were able to sit down and have several conversations" with him in which she pointed out the retirement plans his company used for its staff couldn't have stop-loss solutions because they are employee-directed plans, Alvarado said.
"The main concern was that he was about to make a significant profit share contribution in April for all of his workers. Everybody looks forward to this, because we're talking about a $30 million plan, and a significant amount of money goes in each year as a profit share," she pointed out.
Noting those employees include grape growers, grape pickers and cellar workers, Alvarado added: "This is their life savings" in question.
The winery owner was "extremely concerned" about what was happening with the stock market amid the pandemic and "he did not want to make the profit share at this time — he was very uncomfortable" doing that, she said.
However, over the course of several conversations, she explained to him that during prior pandemics, the market has rebounded, noting: "We were able to soothe down his fears and happy to report that just recently the profit share was funded."
Preventing Layoffs at a Nonprofit
Alvarado pointed to two of her firm's longtime nonprofit clients that are fully funded via the government and donations, and didn't have much savings to cover 2-3 months of payroll.
Her firm helped by providing one of them, a foster care facility in Napa, with "some advanced plan design" for its retirement strategies in order to "suspend their retirement plan liability within the first two weeks," she said. That organization had some furloughs, but was able to retain most of its staff, she added.
