Advice during COVID-19

Reassuring clients plays a greater part in the work of financial advisers than offering actual financial advice, according to financial advisers, with many valuing the advice more in turbulent times.

During the pandemic, market downturns led to heightened volatility and share price crashes which left portfolios in a state of disarray and investors panicking about where to turn. But advisers have said that they were far more involved in helping their clients mentally rather than with their finances. 

They also said the pandemic meant their clients recognised the value of advice more than normal as they could see how their adviser was working to protect their interests even if that meant stopping them from making emotionally-driven decisions. 

There was the risk that clients could make a panicked decision to liquidate their portfolios into cash and then struggle to time when to enter the market but advisers said their clients understood they had long-term strategies in place. 

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All advisers said they felt the pandemic had increased their clients’ awareness of the advice process and made them value it more as a form of reassurance and stability. Some said they had picked up new clients who were in situations which warranted receiving advice for the first time, perhaps after the closure of a business or loss of a job.

Clients also valued the engagement they were able to have with their adviser, which was often carried out digitally rather than face-to-face.

Eugene Ardino, chief executive of Lifespan Financial Planning, said: “We helped investors realise the value of advice and make good decisions, even if that meant not changing anything in their portfolios. The majority of our investors are for the long-term and were less affected by short-term market gyrations.

“We saw a lot of people start getting advice as a market drop always highlights the need for diversification and having strategies that can reduce volatility. In a bull market, investing looks easy.”

Scott Haslem, chief investment officer at Crestone Wealth Management, said: “The premium time to add value as an adviser is during a volatile time when they can see that you are able to sort through the noise for them and create a diversified portfolio. When the market goes up, people question if advice is worth it but it’s about the long-term relationship we have with our clients and the trust that is built”.

“There were a few people who were dipping their toe in the water for the first time when they realised they needed advice, I didn’t hear of any business that was losing clients,” Bryan Ashenden, technical manager at BT said.

Research by the Australian Securities Exchange (ASX) last September found 84% of advised clients said their adviser had been ‘helpful’ in managing the impact of COVID-19 on their portfolios and 41% said their adviser was ‘extremely’ or ‘very’ helpful.

Clients who had been advised during the pandemic were also more likely to invest spare cash and increase allocations to Australian direct shares than non-advised investors.

This was echoed by Fidelity’s ‘Value of Advice’ report last July which found while over half of non-advised investors worried about money on a daily or weekly basis, this fell to 36% for those who received advice.

Denis O’Callaghan, adviser at Fitzpatricks Wealth, said: “We told clients to focus on things they could control, their mindset and their self-worth and spoke to each one every seven to 10 days to keep in contact. Everyone wondered when it was going to end but we encouraged them to take a positive mindset.

“They all already had long-term plans in place, cash reserves so they were confident they could survive three months if they were out of work and their portfolios were set up to manage volatility.”

In light of this, the ASX report said there was interest from those who were not currently receiving advice with 17% of non-advised investors saying they would be more likely to consult an adviser in the future and 63% were ‘open’ to receiving advice.

“There is still scope for professional advisers and investment educators to help investors further improve their skills. While a growing number have come to appreciate the benefits of diversification, many still have portfolios concentrated in a few asset types,” the report said.

“A significant number of investors have also become more likely to seek advice after COVID-19. And while many still believe advice is only for those with large amount to invest, 63% of Australians remain open to receiving advice in the future.”

Haslem added a focus for advisers in 2021 should be working out how they could continue to demonstrate the value they added for clients during the pandemic and how they could promote that to bring in new clients. 

REMOTE WORKING

One of the biggest challenges for advice firms themselves was the move to remote working and having to shift all their systems and documentation to be available from home. Staff were moved to work from home and client meetings were held over Zoom and this was harder for some firms than others depending on their pre-existing situations and geographic locations, particularly those who were caught up in the four-month Melbourne lockdown.

“Remote working wasn’t easy but we made it work. It was easier for mature businesses who had lots of clients but harder for newer ones who were trying to pick up new business. You can’t onboard a new client if you haven’t met them,” said Ardino.

Ashenden said: “Lot of people moved to Teams and Zoom but it was important to consider IT security and accessing information from home. People moved to digital very quickly and we will be likely to embrace that going forward. It was easier for the client than for the adviser though as they needed to ensure they were doing everything correctly”.

“We have been hosting lunch and learn sessions for our advisers online with guest speakers as a way to keep in touch with our advisers and they have worked brilliantly,” O’Callaghan said.

“For clients, we moved to video conferencing and FaceTiming them to give the visual connection. We spent time and money on human skills training for our staff in the past so clients are keen to come and see us in person again.”

Advisers said clients were keen to see their adviser face-to-face again once the restrictions were lifted but they would likely continue to offer the option of digital meetings. 

EDUCATION

There was also the ongoing task of meeting educational requirements for the Financial Advisory Standard and Ethics Authority (FASEA). Exams were moved to digital in certain places rather than physical locations and advisers were encouraged to study online. Meanwhile, study providers such as Kaplan and TAL Risk Academy began offering online study aids and classes.

Exam sittings in April and June 2020 were online only, while September and November exams were online in Melbourne only. Some 11,241 of entrants had passed the adviser exams held to date.

Ashenden said: “A lot of people moved onto completing their requirements in H1 2020 but less so for the exam as they wanted to do that in person given the importance of passing it. 

“We are slowly seeing that turnaround though and people start doing them again as they have realised the pandemic isn’t going to be a temporary thing and more online options are being offered”.

For 2021, there were six physical exams were scheduled between January and November but advisers could take a digital exam if necessary.  

OPPORTUNITIES IN 2021

After the shock market crash of 2020, advisers said they were trying to use the lessons learnt from last year. This included offering the options of digital engagement to clients and emphasising the importance of having diversified portfolios. 

“Not everyone believes that having a diversified portfolio, in terms of assets and geographies, is important but last year has shown that they are critical to preserving capital,” Haslem said.

Ardino said he expected an increase in managed accounts and managed discretionary accounts as they were easier to manage volatility.

“Around 30% to 40% of our advisers use them and we expect this will increase as we educate advisers about them. It is a no-brainer as it reduces costs and allows us to make changes in a crisis very quickly, it makes sense on a lot of fronts,” he said.

They also questioned what would happen once stimulus measures were withdrawn and whether people would go back to working in CBD offices or continue to work remotely.

“The recession was offset by massive amounts of stimulus, growth assets have done well but that is because of the market stimulus and liquidity. When that unwinds, what will happen? Navigating the next 12 months will be a challenge for portfolio managers,” Ardino continued.

In an unexpected move, O’Callaghan said he had been building relationships with liquidators for the past few months in expectation of business foreclosures. 

“We have built relationships with liquidators, they actually had their quietest year in 2020, but they will be looking to capture businesses and shut them down and we have clients with cash ready who are looking to buy at firesale rates,” O’Callaghan said.

“There is a quiet optimism about the future and there are opportunities coming up. We have stayed optimistic that the world would not end and are looking to flourish in 2021.”

THREE TIPS FOR ADVISERS IN 2021 – ​BRYAN ASHENDEN, BT:

• Think about how you can capitalise on what you learnt in 2020;
• Give clients the choice of how they want to have meetings, even when things reopen, they may still be happy with online communication or want a hybrid; and
• Demonstrate the benefits of being advised and the value you add to clients, find a way to demonstrate those positive outcomes to help you bring in new clients.

THREE TIPS FOR CLIENTS IN 2021 – DENIS O’CALLAGHAN, FITZPATRICKS WEALTH:

• Have cash reserves saved for three months which you leave untouched so you know you will be OK if you lose income temporarily;
• Have a team of professionals around you who understand your goal; and
• Focus on yourself and what you can control.