Client outreach underway as government closes

The shutdown outreach has begun. Many financial planners are reaching out to clients with this advice: Don't worry about the impact that the government shutdown will have on investment portfolios, as long as the president and Congress resolve it in a few days. “A government shutdown sounds like a scary thing, but we're telling clients that if it's resolved in a week, then it's a non-issue,” said Gerard Klingman, president of Klingman & Associates LLC, who has been e-mailing clients over the past few days as it became clear that a last-minute solution to keep the federal government open in the new fiscal year wasn't coming. He's pointing out to clients that while a shutdown has occurred in the past, “if it drags on for more than a week, then markets will really react negatively.” The Dow Jones Industrial Average was up about 0.4% on Tuesday afternoon. Mr. Klingman said clients across the political spectrum are “exasperated with Washington” and that the longer the shutdown goes on, the worse it will be for consumer and business confidence. Before the current closure, the government shut down in 1995 from Nov. 14 to Nov. 19 and from Dec. 16 to Jan. 6, 1996, as Republicans led by then-House Speaker Newt Gingrich clashed with President Bill Clinton's administration. “Most people anticipate that it will not last real long, that someone will come to their senses and do whatever back-office deal that needs to be done,” said Norman Berk, founder of Berk Cleveland Rathmell Wealth Strategies LLC. “But if the fight over Obamacare becomes part of the debt ceiling debate and they don't raise the debt ceiling, there is a potential to be cataclysmic.” The deadline for raising the debt ceiling is Oct. 17. Experts agree that defaulting on the country's debt would be more damaging to the economy than a short government shutdown. But even a government shutdown of a few days has some impact on investor confidence and potentially the economy, Mr. Berk said. “If you were about to buy a house or a car, would you? I wouldn't,” he said. In a mass e-mail to clients and other firm contacts late Monday night, Mr. Berk said: “The direct immediate impact to most of us will be limited. If the shutdown continues for a longer period — the shutdown in 1995-96 lasted 21 days — the impact will get progressively worse as the toll of not having government workers working will permeate through the economy.” The e-mail also tried to explain the use of continuing resolutions and laid out which government spending is immediately curtailed. Most advisers agree that this event is important enough to demand communication with clients. “Anything like this and you have to be in communication with clients, even if you don't know the end result,” Mr. Klingman said.