The Value Proposition of a Financial Advisor for a Post-COVID Era
We didn’t realize it in January 2020, but financial advisors and clients were entering a whole new world.
After COVID-19 entered our lives, physical health concerns were paramount. But the initial stock market plunge and return to an extremely low interest rate environment also precipitated an intense focus on financial health.
As clients began to rethink their lives on many fronts, my colleagues and I began to reconsider our roles as wealth management advisors. With this new landscape before us, what will our roles be? How should they change? After the pandemic, how can we help customers be as prepared as possible? What are the main issues they need to consider for their financial future?
We believe that advice from an advisor has increasing value, especially as financial markets are more volatile than we have seen in years. Perhaps more than ever, events are affecting the financial well-being of investors faster and in every possible direction. As advisors, our essential role is to filter out the noise and understand the long-term ramifications of momentary seismic events.
Working with a Wealth Management Advisor provides investors with an experienced, objective outside perspective that can weather daily market jolts and keep clients focused on their long-term investment goals. Moreover, in this new era, advisors can no longer simply be order takers. Multi-generational relationships begin with advisors who understand clients’ stories – who truly listen to their goals and engage with them using empathetic expertise.
In December, Wilmington Trust released our annual report Capital Market Forecasts titled “Economic Arrhythmia: Businesses Adapt to the Global Resource Disorder”. In this edition, we’ve listed many of the disruptions businesses and investors have faced since the coronavirus pandemic hit. But our main goal was to give investors a guide when thinking about their own financial future. To do this, we explored questions such as:
- What have companies done in recent years to position themselves to thrive and be more attractive to investors?
- In an era of historically low interest rates, have they used access to cheaper sources of funding to bolster their technology? Increase their cybersecurity? Hire new leaders?
- And how can advisors help clients rethink their plans in light of the world around them?
Much like the electrical impulses that make our hearts beat, the US government has provided trillions of dollars in stimulus funds designed to support consumers and defibrillate the economy during the worst days of the pandemic. But now, as life seems to be returning to some normality, new dislocations in key pockets of the economy – erratic beats, if you will – are creating new economic problems every day.
As we look at the best strategies to help clients move forward, I find myself leaning on one very simple principle more than ever: “Be Prepared”. As advisors, we can’t tell clients enough about the importance of having a comprehensive plan that takes into account all the important factors in their lives: money, career, family, philanthropy, personal passions and what keeps them awake at night. But even with a well-crafted investment plan that reflects a family situation, unexpected world events disrupt markets and precipitate the need to reevaluate.
Two current disruptions are prompting many investors to make the necessary adjustments to their investment strategies. The first is geopolitical change. The Russian-Ukrainian war caused problems in global financial markets – especially in equities, which had seen a long bull market – leading many investors to reallocate to cash and commodities. As advisors, we can help reassure clients and prepare them for a range of eventualities by diversifying portfolios, hedging certain risky assets, etc. But we can also help them understand that geopolitical events offer not only challenges, but also opportunities. Helping them see this is key to avoiding an overreaction.
The second is inflation. Advisors must prepare clients for higher prices, higher wages, and global government responses to these trends. The Federal Reserve halted its monthly bond purchases in March after flooding the market with liquidity for two years and raised rates again in May.
This should continue for some time, and the Fed could end up taking even more aggressive action if inflation does not slow. Throughout the inevitable twists and turns the Fed will take, advisors should use their experience to help clients best position themselves considering the impact on loans, fixed income investments and other rate-sensitive components. .
Most importantly, we need to help customers create a plan and prepare for the unexpected. Clients need counselors most when an impromptu event leaves them wondering, “What will this mean for me and my family? “Will I ever be able to retire comfortably?” and “Can my kids still go to their dream colleges?”
During the pandemic, I noticed that the acronym YOLO – you only live once – came up more and more frequently in my conversations with customers. They told me they were more focused on maximizing their finances, enjoying enjoying their families, and working for a purpose.
If we as advisors do our job, we can help make this happen.