Taking a ‘glass half full’ approach

There is no doubt volatility and uncertainty has plagued markets since the COVID-19 outbreak was declared a pandemic at the beginning of the year.

Globally, lives have been turned upside down as the way we live and work has changed dramatically.

Over the last few months, financial advisers have been inundated with requests from clients all while making sure their remote working setup can support their client needs without sacrificing the quality of their advice. 

Advisers who spoke with Money Management said their biggest concerns were mainly surrounding the uncertain nature of the pandemic and how it would affect investments and regulation but were optimistic about the opportunities the situation brought.

The advisers also said conversations with clients were largely focused on client goals rather than investments and cashflow.

This was echoed by a survey run by Money Management that found 66.7% of respondents’ conversations with clients were on client goals, followed by cashflow, investments and portfolios.

The general outlook from these advisers lent towards being ‘neutral’ and ‘negative’ in terms of their clients’ investments over the next 12 months, with few respondents believing it would be ‘positive’. 

A respondent said unemployment and uncertainty would have a major impact on market sentiment and another said as the full impact of social distancing had on economies slowly became apparent, it would lead to more negative sentiment.

Another said a well-constructed portfolio would be able to withstand the downturn and the next one. 

Lifespan Financial Planning chief executive, Eugene Ardino, said that adviser sentiment was quite mixed with some advisers in “pretty dark” places due to stress and anxiety, some positive, and some in between.

“It’s a really difficult time out there for advisers and consumers and it is important as a community to help each other,” he said.

Those in dark places, Ardino said, were struggling commercially and mentally as business concerns were combined with regulatory change, understanding the Financial Adviser Standards and Ethics Authority (FASEA) code of ethics, and grappling with restructuring income streams. 

A recent adviser sentiment survey from MLC Wealth found that 88% of advisers were trying to stay positive and active by planning for the months ahead, 86% said the period would eventually pass, 49% had a degree of concern and were worried but were trying to remain positive, and another 36% said the pandemic was having a negative toll on their mental wellbeing.

However, while the very nature of the pandemic had hurt adviser sentiment, Ardino noted that a lot of advisers were already gearing up for a market downturn prior to the outbreak as market levels and valuations were at “crazy levels”.

“There was quite a large number of asset prices that had stretched valuations and so advisers were gearing up for that. No one likes account balances going backwards but if you were well positioned for it you can turn it into an opportunity,” he said.

“But the situation has still caused stress and extra work as advisers were already dealing with regulatory change, matched with the potential loss of income streams and having to restructure the way they service and charge clients, along with dealing with a massive market downturn. This will really test the viability of certain businesses.”

Pride Advice’s chief executive, Brett Schatto, said he was initially concerned about how he was going to maintain ongoing client reviews as many were used to coming into the office. 

However, he said clients had been able to adapt to Zoom and online meetings and the use of virtual documents. He noted clients had actually been calling up to check whether the advisers at Pride were well and how they were coping with working from home. 

Verve Group director and senior wealth adviser, Matthew Carberry, said his biggest concern was the big unknown on the timeline of the pandemic and what would happen after it was over. 

However, he was confident in the advice business as people in this environment would be looking at their finances and needing advice. He noted that there would be a lot more ad-hoc advice rather than the traditional annual review from long-standing clients.

“You’ll see more ad-hoc one-off advice for clients who will come in for a specific reason. We’ve seen a lot more strategy advice and less on product.”

“They’ll come in with an issue such as how to deal with cashflow, planning, or how to set up a transition-to-retirement plan and then will implement it themselves.

“People potentially will look to save money by doing things themselves by seeking general advice and then going off on their own.” 

He said there were still new clients flowing into the business and that panic regarding investments had eased off. 

Fitzpatricks Private Wealth WA lead adviser, Garry Symonds, said he was “glass half full” on the current situation as there were new opportunities to help people with their wealth. 

The MLC Wealth survey also found that 45% of advisers saw the current environment as an opportunity to focus on client growth and retention. 

CLIENT GOALS

Symonds said client conversations on their businesses were the focus, rather than their investments.

“We are keeping clients focused on things they can control and to look forward. Our job is to give direction, capability, and confidence because business owners are scared as they just don’t know what things are going to look like. 

“Advisers have got to be available, prepared to listen and let clients talk about whatever is on their mind and try and help them. Our clients’ business forms a large part of their personal balance sheet. That’s where the cash comes from, that’s how they generate income to allows them to do what they want. 

“As soon as COVID-19 started to become hairy my advisers have been on the front foot. They were ringing clients, talking through their situation, answering questions they had, and being proactive. That’s been key to keeping clients calm because that’s our job during this period of time – keeping them on the path on what they want to achieve.”

Schatto stressed that a successful retirement was not about how much money people had but rather their quality of life and happiness.

“This health-led economic disaster has really shown people that the conversation around their finances isn’t as great as conversation about their health. Money doesn’t dictate happiness we have in the decades that we live,” he said.

“The pandemic has put a spotlight on what clients want as goals, and this is refreshing. By having these conversations, advisers will come out the other end with greater relationship with clients.” 

INVESTMENTS 

One of the positives to come out of the pandemic, Schatto said, was that clients had more time on their hands so were educating themselves on investments which created better conversations between advisers and their clients.

He said clients were now able to understand why there were particular investment decisions that had been made and that they were bringing up topics they did not understand before such as listed and unlisted asset allocation.

“For the first time clients are actually talking about unlisted asset allocation and saying ‘I didn’t know that’s where industry funds were invested’. And for the retirees they’re saying ‘I don’t have 30 years so why do I have money in unlisted assets?” Schatto said.

“It’s been an educational piece and clients are more understanding and are taking more interest because they’ve had the time to read and watch more investment content and this creates a better and more meaningful conversation with the adviser.”

Carberry noted that it was currently a great buying opportunity for long-term investors who had the money and the right structure to ride out the volatility.

“I’m neutral in investment sentiment over the next 12 months and positive for three to five years but it will also depend on COVID-19 and how quickly things open back up again and what restrictions are in place, along with discretionary expenditure and markets,” he said.

TIPS FOR ADVISERS

For advisers who were worried about the market volatility, Ardino said they needed to be in front of their clients, educating them, and making sure they were aware of what was going on. 

“It is important in any crisis to try and alleviate panic and comfort clients,” he said. 

Advisers also needed to make sure they were informed and aligned themselves with good research sources and houses so that they could be “armed with information” for any enquiries from clients.

Ardino said it was also important for advisers to remain calm as making rational and informed decisions would also keep clients calm.

Despite the uncertain environment, Carberry said this was the time for advisers to show their value and said a lot of the value came from the behavioural side of things.

“A lot of it is education at the moment on what has happened, how their superannuation has been affected, what’s happened historically – which probably gives them a bit of comfort, and how things have rebounded,” he said.

“The curveball at the moment is the jobs and incomes being knocked around, with some forced closures of businesses, and what to do for clients who have had their income affected. At the moment you want to be practically providing information, service, and being accessible to help clients not make silly decisions with their money.”

Symonds agreed and said an adviser’s job was to be on the front foot and be prepared to listen to clients.

“Conversations with clients should look forward and advisers need to reassure them that they will come out the other side,” he said.

“The important questions to ask is what is the recovery and bounceback plan? What have you learnt through a bad situation? And what can you use in the future to make your business better?”

DEALER GROUP SUPPORT

Reassurance was not only for clients but for advisers as Symonds said having a dealer group and the network it came with had been very helpful during this time.

He said Fitzpatricks had held regular weekly catchups with advisers on tips for working from home and how to help clients.

“I was on a call yesterday with 60 people from the adviser community and we all shared information with how we were coping, tips on technology like electronic signatures, and so on,” he said.

“Professional isolation is tough for people at this point in time and if advisers are not connected to groups, whether it is a dealer group or not, it would be very tough. There is a lot of value with being connected.”

Both Carberry and Schatto said they liked the assistance dealer groups brought to their practices and processes they could outsource.

Schatto noted that his dealer group, RI Advice, helped educate staff, and covered 20% of practice processes that could take a lot of time which allowed the advisers to spend more time with clients.

“I like having ‘Big Brother’ looking at our processes as there is safety from a client perspective when it comes to decisions made by our advisers,” he said.
In terms of information, Schatto said he was bombarded with information surrounding COVID-19 but that the dealer group’s information and its interpretation on the Government’s stimulus packages had been very useful.