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More than ever, advisors must innovate their approach to position clients for long-term success
June 2020, BOSTON—Now is the time for wealth management providers to reinforce their value to clients—especially in helping them overcome adversity in pursuit of their long-term financial goals, according to the latest Cerulli Edge—U.S. Retail Investor Edition.
After a January and February marked by a still-strong bull market, the COVID-19 pandemic and resulting market volatility has shattered investors' optimism in the economy; net economic optimism fell 90 points between February and March 2020. This is especially acute for those in advisor-directed relationships, whose optimism was the lowest of any advice relationship surveyed for that month. Faced with near unprecedented levels of uncertainty, advisors should reassure their clients that markets typically rebound in the long run, and reinforce clients' financial goals and objectives to keep them on track while making the appropriate adjustments to combat volatile markets.
The current period has the potential to fundamentally change investors' risk appetite. As such, advisors should revisit the topic, both to help reassure their clients of the expectation of events such as this in the lifecycle of a long-term portfolio, and to understand whether there have been any significant changes in a client's risk appetite. Cerulli’s research finds that households are predominantly indicating an interest in adopting a holding pattern for their portfolios. “Advisors should be heartened by these developments, as the risk of people panic selling investments at a down point appears low, but this does mean that the money that was added during the good times should be prudently cared for so that it optimally serves clients' long-term goals,” says lead investor practice analyst John McKenna.
Additionally, the recent market volatility has put wealth protection in the forefront of more investors' minds. For advisors and planners, this suggests a continued focus on long-term planning for younger households and may require earlier-than-planned discussions regarding more conservative investments for near-retirees who want to protect their hard-earned gains from being significantly impacted in future downturns.
Helping investors through this period of uncertainty will increasingly depend on the incorporation of digital technology. With in-person meetings sharply limited by social distancing and non-essential business closures, advisor-reliant households may seek online alternatives as a way of keeping up with their financial life in lieu of face-to-face interactions. Past research by Cerulli indicates that integrating digital tools with human advice will be expected of any advice relationship, but it becomes especially important when in-person meetings are more difficult, if not impossible, to schedule. In addition, Cerulli’s research finds that investors who work closely with advisors express elevated interest in using online portals to access their accounts easily. “Leveraging these tools not only increases the value advisors offer their clients, but also serves as an important bridge at a time when nearly every in-person interaction makes its way online in the name of public health and safety,” adds McKenna.
NOTES TO EDITORS:
These findings and more are from The Cerulli Edge—U.S. Retail Investor Edition, 2Q 2020 issue.
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