The COVID-19 pandemic has caused businesses across industries to review how they function and engage with their clients. The market uncertainty has naturally put tremendous pressure on the financial advisory industry as we know it. The sudden devaluation of businesses and the loss of key client accounts has created a liquidity crisis. The pandemic is testing the resilience of businesses in terms of their financial, operational, and commercial capabilities. It is forcing them to adapt rapidly and at scale to meet market demands and operate in an environment with unique constraints.
How has COVID affected financial advisors? The financial advisory industry, overall, has had to deal with massive change. Many clients are asking about reducing deposits to funds, freezing accounts, or withdrawing.
Everything isn’t doom and gloom, though. People are looking to financial advisors now more than ever for sound financial advice. This offers smart financial advisors an incredible opportunity not just to survive the current crisis but to thrive by COVID-proofing their practice. In this article, we will look at some of the critical threats facing financial advisors right now, as well the actionable steps you can take to COVID-proof your financial advisory practice.
Impact of COVID-19 on the Financial Advisory Market
The pandemic brought all activity-including threats – to a halt. But, with each passing day, we are getting better at working around the pandemic. This has led to the rise of new threats and the re-emergence of old ones. Here are some of the risks the advisory sector is facing right now:
Fraud and bad faith – The financial service industry is dealing with a rise in post-COVID fraud. With millions of people applying for credit and financial support, applications are being processed rapidly, with less stringent controls than usual. This does not just apply to loan and bailout beneficiaries. Many businesses operate on credit-based supplier relationships. In current times, there is a greater likelihood that your clients will face bad-faith situations. This makes advisory and risk assessment especially important right now.
Cyber resilience – Cyber-attacks have surged in these turbulent times, from simple phishing mailers to sophisticated attacks on networks. Financial advisors need to invest in cybersecurity and educate clients about the importance of being cyber secure to mitigate risk.
The revenue decline & growing competition – More clients may be looking to pull their investments out or to put a pause on their relationship with you, leading to revenue decline and increased competition for a limited pool of investors. The flip side to this is that as the marketplace and businesses are changing, so too is the investor. Today, many investors are looking for ways to secure their finances in the long term and mitigate the risk of future crises. On the other hand, other investors are looking to find opportunity in chaos by leveraging high-risk, high-reward strategies. Financial advisors need to have compelling answers for both types of clients.
The Way Forward for Financial Advisors
Increased market volatility has led many advisors to ramp up client communication and reinforce the message to maintain fiscal discipline. The primary need is for the advisors to communicate proactively with clients who might lose money due to emotional, poorly timed, and value destructive decisions under pressure. Examples include pensioner clients in drawdown or those with live withdrawal requests.
The pandemic has also exposed the insecurities and reluctance of financial advisors to embrace new communication technologies. With the continuation of social distancing posing a challenge to face-to-face meeting, there is a renewed focus on remote service models. The disruption has emphasized the need for greater efficiencies in communications and services.
With time and budgets in short supply, building process efficiency is vital to make the post-COVID migration as seamless as possible. The combination of changed client expectations and revenue pressures has put significant pressure on some financial advisors while presenting a clear growth opportunity for others. The two biggest challenges financial advisors need to address are:
● The delays in servicing requests
● Inadequate communication
Financial advisors need to take several steps to effectively adapt to the changes being brought about during the pandemic. These include:
1. Effectively promoting your brand initiatives – People are more likely to invest in your services if they feel personally invested in your business. To gain and retain customers during this economic downturn, promote your company history, your commitment to your clients and their financial goals, and showcase sustainability efforts, CSR activities, or charities you support.
2. Provide valuable insights into your communication through helpful content – Instead of sending generic emails to drive motivation and positivity, focus your communication that offers useful insights during this time of need. Address the problems through webcasts, podcasts, online tutorials, and teach your customers approaches that solve their current issues. Connect with your clients regularly through online events or live video streams and keep them engaged. Your content should come across as genuine, educational, and entertaining. This is a great way to connect with your customers and remind them that you will help them with their financial goals.
3. Modify your products and services – A great way to stand out at this time is by assessing the kind of unique solutions you can provide to meet today’s client needs. Instead of selling an advisory product or a service that is currently irrelevant to consumers, analyse what you can do differently, and meet changing needs.
4. Adapt to technology and add digital products and services to your portfolio Financial Advisory has been traditionally a face-to-face, interpersonal connection, which is difficult in today’s environment. Offer consultation and training through webinars, connect with existing clients and potential clients through video conferencing, and plugin website automation tools to service requests. These are just some ways to use technology to continue supporting your customers and gain new ones by leveraging digital.
5. Add a human touch – The pandemic has personally impacted your clients and their finances. This makes how you communicate as crucial as what you communicate. Personalized messages, handwritten cards, customized emails, and check-in phone calls to check on your customers will go a long way towards retaining your clients. SignalMind, a firm that specializes in building responsive websites and helps manage customer loyalty programs, reports that the probability of converting an existing customer is between 60% and 70%. Moreover, repeat customers spend an average of 33% more than new customers. This makes social outreach to your existing clients an invaluable way to shore up your revenue situation.
6. Provide incentives – Customers are bound to come back to your advisory website and social presence if you keep providing insightful content at regular intervals. Free trial consultancy, coupon codes, and onboarding discounts are some of the incentives you can provide to customers.
Importance of Building Your Financial Advisory Brand
The importance of building your brand is something that industry experts across verticals emphasize. It matters for financial advisors too. Why does this matter right now? With increased competition, you need ways to stand out in the crowded advisory market; something branding can enable.
Maintaining a consistent brand proposition through your client interactions and creating brand signalling tools can help you establish your brand. Add your logo to your image posts on social media to increase brand retention. Social media is an essential tool, as your customers are already scrolling through these platforms. You need is to create compelling and engaging content and posting at regular intervals to bring your brand to the top of their news feeds. Make sure to answer comments and respond to direct messages as a part of your brand building process.
Also, leverage opportunities to showcase your thought leadership. This could be in terms of webinars, collaborating with experts, or authoring advisory articles for high-value publications or websites.
Leveraging automation and digital media to save operating costs
Automation and digital platforms can help you save a significant amount of money through process efficiency, potentially offsetting some of your revenue loss. Chatbot automation on your website can help clients and leads self-serve when it comes to fundamental questions about your services. This frees up time you can spend on high-value work. Online advisory platforms are a great way to connect with new clients by offering you a virtual storefront, not limited to leads in your immediate geographic vicinity. Video and audio-conferencing tools can help you provide advisory right from home, cutting down on transport and office costs. This can enable you to offer more competitive rates to new and existing clients.
‘Business as usual’ is not something that any of us will hear any time soon in the wake of this pandemic and all the change and uncertainty it brings. This is a time for consolidation, to ensure long-term sustainability, and to nurture opportunities for the post-COVID future.
COVID-proofing your financial advisory practice means identifying the gaps in your practices, mitigating risk, optimizing efficiencies, and leveraging digital to stay relevant. Now’s the time to adapt to changes and learn. By offering what clients need right now and planning for the future, financial advisors guarantee their own security and can play a part in stabilizing the overall economy.