More than a month into the New Year, it’s clear that the economic uncertainty that reigned in 2020 won’t abate any time soon. Last year proved that advisors who can guide their investors through these ambiguous times have an opportunity to prove their value to–and cement their relationship with–their clients, according to recent surveys from Cerulli, iCapitalNetwork, Broadridge, and Nationwide.
We previously anaylzed these surveys for our Advisor Report Card 2020, but we took another look at the data to find lessons that will serve advisors through 2021. Here are the top takeaways:
Be empathetic.
An overwhelming 80 percent of investors said they’re satisfied with their current advisor, according to a recent survey from research firm Cerulli Associates. In particular, investors cited high satisfaction with “the transparency, honesty, and dependability of advisors,” according to the report.
“By keeping clients abreast of market developments, while also lending a crucial empathetic ear, advisors reinforce their importance to clients and the value inherent in personalized advice relationships.” Moreover, 82 percent of investors working with an advisor believe the services they get from an advisor are worth the price.
COVID-19 has also extended the client service reach of financial professionals beyond traditional financial concerns. According to a recent study conducted by Ulicny Financial Communications and 8 Acre Perspective, 60 percent of advisors said they are spending “more time with clients on non-investment-related financial issues,” while 84 percent said developing their clients’ financial literacy has become more important and 51 percent said they have been fielding more questions “about healthcare and estate planning.”
Cerulli Associates
Focus on diversification.
Following the financial crisis of 2008, investors enjoyed a decade-plus bull market that saw equities return more than 300%. “Today, however, pandemic-fueled volatility and a very uncertain market outlook have many advisors and clients seeking a steadier ride as well as diversified sources of return,” according to a report from iCapitalNetwork.
“Adding a 20 percent private equity allocation to a traditional 60/40 stock/bond portfolio may enhance return potential while mitigating risk,” the report continued, noting that 69 percent of advisors “see opportunity in the current environment and are reshuffling portfolios with a goal of improving client outcomes.”
Most investors appear to be under-diversified and overdue for a portfolio rebalancing as well, according to the consumer version of our study with 8 Acre Perspective. “Seventy-five percent of investors reported their financial situation is as good as or better than before COVID-19,” the report stated. Yet, “more than seven in 10 have not made changes to their portfolios.”
Communicate more – with advice.
A whopping 79 percent of investors reported more frequent communications with their advisor since March when stay-at-home mandates were first issued, according to a Broadridge survey of 1,000 North American investors.
When asked what communications they most needed from their advisors, respondents agreed that after a comprehensive view of their accounts, they wanted tips on saving money, new investment ideas and a personalized analysis of their investing habits.
And investors aren’t looking back: “We are seeing an accelerated adoption of digitalization and personalization from investors, financial advisors and wealth firms as a result of the pandemic,” the report continued. “As a result, investors don’t want a return to the past. They largely prefer this new normal.”
Broadridge
Reach out to first-time investors.
COVID has motivated legions of investors to think twice before “doing-it-themselves.” One in four Americans polled by Nationwide last summer said they sought the help of an advisor for the first time ever. That’s a huge opportunity for advisors to create a potentially long-term relationship.
“Even if they do all the right things to manage their finances and investments, the vast majority of Americans agree they can still be blindsided by outside events,” the report added.
Advisors topped the list of trusted sources for general financial and money management advice during the pandemic, followed by friends and family as well as online portfolio tools.
Nationwide
Engage with client’s family members.
A startling 44% of investors, when asked to complete the statement, “My financial advisor has communicated with my (children, grandchildren, heir or spouse)” answered, “None of the above,” in the Broadridge investor survey.
