Covid-19 Handbook

Covid-19 and the Wealth Management Industry: What You Should Do Today and What You Should Expect Tomorrow

By :
Samir Vasavada
Here is our thoughts on what you should do during the pandemic and what you can expect when moving past it.

In the past few months, chances are your phone has been ringing off the hook and your email inbox is overflowing. In a time of unceasing and unpleasant change, it’s tempting to concentrate on the immediate future. For many people in the age of COVID-19, “long-term” has come to mean “next week,” given how quickly bad news has arrived and how rapidly long-held certainties have disappeared. COVID-19 has had an adverse impact on the wealth management industry — portfolios plummeted in the first weeks before a quick rebound — but we shouldn’t neglect the opportunities for renewal left in the wake of the calamity. Registered Investment Advisors have an opportunity to lay the foundations for substantial growth. After all, they’re paid to think in the long term, beyond next week or next month.

New tools for a new era

For some advisors, increased demand may necessitate changes to the way they operate their business. If an RIA has traditionally added one or two clients a month, they’ve probably been able to make do with manual onboarding processes. But with new clients appearing in record numbers, some advisors may find themselves in need of help. What’s feasible in normal times may become impossible in an era that sees many RIAs receiving seven or eight new accounts every month. A platform solution is easy to implement and will continue to save users time and effort even when the world and the markets return to normalcy. 

Many financial advisors report increased interest in their services; how can you assure that clients come to you instead of going to your competitors? Potential clients are likely to shop around, and so differentiating yourself from your peers is vital for winning new business. In this new market, RIAs who are able to customize portfolios to client-specific needs and risk profiles will be more convincing. For example, if a client employed in the tech sector might have substantial equity in her firm; a responsive RIA could reduce tech weightings in her portfolio so that she’s not overexposed to a single sector. If you can’t account for individual needs, would-be clients will go elsewhere: To more flexible peers or even to passive index funds.

Under-budget on overhead?

The global pandemic arrived in a period of increased technology spending. In mid-2019, 58% of financial advisors reported they hoped to invest in new technology, citing its capacity to scale client-base growth, reduce rote tasks, and let employees work on more lucrative projects. In early 2020, before lockdowns, pauses, and quarantines began in the United States, financial advisors were considering new tools to meet Reg BI requirements scheduled to go into effect at the end of June. The international crisis should spur further investment in technology. As innumerable commentators have stated, the world has entered a new era. Financial advisors shouldn’t expect to thrive in this new time if they enter it with inefficient legacy tools. New tech can reduce overhead, accelerate client acquisition, and free up advisor time for key tasks.

Catch up on communication

Financial advisors, like their clients, are now working from home and in isolation. The face-to-face meetings that are essential to maintaining trust and ensuring client confidence have been replaced with Zoom chats and Google Hangouts. And the conversations advisors are having may differ from pre-pandemic discussions. As an analyst interviewed by CNBC noted, many calls are more about emotional support than about specific investments or strategies. Clients may not wish to hear how much their portfolio has declined; although the markets have begun to rebound, worried clients may want general reassurance more than specific facts and figures. 

However old and established or young and developing your client base may be, communication skills are essential for maintaining and strengthening relationships at this time. Even should your AUM shrink during the crisis, you should plan to emerge with a stronger connection to the many people who trust you with their money. Effective communication is frequent communication: While you should be responsive to anyone who reaches out to you, you should also be proactive, and reach out to clients you have not yet spoken with. Longtime clients may be comparatively easier to reassure; though nothing has quite compared to COVID-19, chances are that these clients have already weathered several recessions and downturns. Younger clients may be more distressed; it’s your responsibility to remind them that a long-term perspective is essential for their peace of mind and for the growth of their assets. 

No one will look back fondly on the year of the coronavirus: It’s been demanding for everyone and ruinous for many. Even so, financial advisors have the chance to leave lockdown stronger and more capable than they began it. The relationships they build with clients, the processes they improve, and the tools they start employing will help them confront today’s challenges, of course. But just as important, today’s actions will help them build tomorrow’s wealth. The effects of the decisions you make now will be felt for years and decades to come. Today is just one day, 2020 is just one year, and you and your clients are together for the long haul.

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