The post-pandemic world of financial advice
In the second quarter of 2020, the US economy plummeted to its lowest point since the 2008 financial crash due to the pandemic. Since then, financial advisors have adapted to many new challenges and adjusted client expectations. Post-COVID, what are the trends and practices dominating financial advice conversations, and how can your business remain successful?
A country financially recovering from COVID-19
Although many consumers and companies are still feeling the aftershocks of the COVID-19 pandemic (especially smaller businesses with less of a safety net), the US economy has, overall, enjoyed a rapid recovery.
And you’ve likely been so focused on keeping your head above water in these trying times that all the changes to the financial advice industry still seem huge and daunting. But they don’t have to be.
Demand for financial advice is recovering with the economy, and if you can understand your clients’ new priorities and expectations, you can meet their need for support.
You can offer trusted guidance, seizing a slice of the market at just the right moment.
What’s changed in the financial advice industry?
So, what’s changed?
Several major evolutions to the way financial advice companies should ideally conduct their business to stay relevant and well-respected have occurred since March 2020.
Many of these were triggered by the pandemic, but the growing number of millennial-age investors is also an influencing factor, shifting dynamics and requiring advisors to adjust.
The digital economy has expanded hugely – Technology, accessibility and digital connection are all musts. Clients much more commonly expect their financial advisors to be flexible about remote meetings and readily contactable via video calling software like Zoom and Google Meet. They also tend to desire more frequent, proactive communication
There is more ESG investment interest than ever – ESG (Environmental, Social and Governance) investing, sometimes called “sustainable investing,” is very popular. More investors are focused on improving the environment, the world and the economy alongside profiting, and more clients are asking advisors if they can explore the world of ESG
Regulations and safeguarding practices have been updated – The regulations put in place after the 2008 crash stand firm and have, in many cases, been adapted and updated to reflect new digital working methods. Financial advisors are still required to represent client interests, whether meeting with clients in person or online
An aversion to risk is more prevalent – For clients hit hard by the pandemic (a considerable proportion), risk aversion has increased. This is especially true for women, who were statistically more negatively impacted by the pandemic than men. 28 per cent of women say they have become more risk-averse and expect more guidance from advisors post-COVID
Which changes are here to stay?
Regarding changes triggered by COVID that will remain in place, the consensus is that remote work and hybrid work are here to stay, and so are practices like going paperless and fully digitizing records.
Even for workers heading back to the office building, digitization is incredibly useful, and removing paper waste from the office environment can have a considerable positive environmental impact.
As a financial advisor, you’ll need to adapt your business/role to these changes. You’ll also need to account for other dynamic changes unrelated to the pandemic.
For example, the shift to younger investors is well and truly ongoing. Over the next two decades, it’s predicted that over $50 trillion in investments will pass from baby boomers to their descendants.
Some things remain unchanged by the pandemic. Though there was a temporary reduction in the number of people seeking financial advice at the pandemic’s peak, numbers are rising again.
The need for financial guidance isn’t going anywhere anytime soon; if anything, technological advancements have made attracting new clients even easier.
Plus, the need for good customer service and transparency remains unchanged.
Above all, the thing to note is that clients are only likely to invest if they believe it will work out for them, and many are more risk-averse than they were.
Evolving and standing out in a digital landscape
The speedy rate of change in the financial sector has given businesses a lot to catch up with.
But just like in other industries, many of these new dynamics aren’t just an obstacle to overcome — they also offer financial advisors the chance to grow their business and increase their return on investment.
As a financial advisor in the present day, adapting to remain as relevant as possible, try to be open to new things.
There are five core ways to make your company highly effective in the world of digital financial advice as it now looks.
Each way is a route to showing clients that your business is unique, to be trusted, and valuable:
1. Embrace remote working options — Some remain dubious about remote work, but it has many benefits. By the end of 2022, 25 per cent of jobs in North America could be remote. WFH (Work From Home) financial advisors registered with major broker-dealer firms earn 80 cents per dollar of revenue and could receive a payout of 75 per cent by keeping their expenses low
2. Incorporate technology and automate your business — At a time when companies still need to retain money, automation and effective use of technology can reduce costs, increase efficiency, and help businesses meet higher expectations/improve the client experience
3. Reduce environmental impact — From making eco-friendly ESG investments to going paperless and digitizing your records, try to reduce your impact on the environment. This will be an increasing priority for younger investors in the years to come. Plus, total digitization grants enhanced data security and paves the way for better organization
4. Emphasize a diverse, accessible service — Different clients have different needs. Demonstrate that you can deliver effectively to various people in various financial situations and back this up with flexible, accessible options (including digital options)
5. Share your credentials — You'll reach a broader client base and gain their trust by publishing your reviews, case studies, and testimonials online. Where you can, take the time to encourage existing clients to make referrals, too. Let your track record speak for you
Kate has written for leading publications and blue chip companies over the last 20 years.