Advice businesses I talk to, both large and small, are taking stock of those changes – from the uptake of digital communications and decline in face-to-face contact, to the incoming recession and rise in joblessness – and assessing how they will disfigure the landscape of our economy.
One thing is for sure, this ‘new normal’ isn't going to disappear in the next few months. And this begs the question: with clients suddenly having a whole new set of needs and expectations, is your company still geared up to service your clients guidance and advice needs?
The commercial world has not stopped – far from it. People still need to pay their regular outgoings, like mortgages or rent, utilities and car finance, food and clothes.
Yet, many are furloughed and on reduced or less certain incomes and they are taking big, potentially risk-laden, actions to find ways of replacing lost income.
In some cases, that means dipping into ISAs, other investments or emergency savings. Others, who are over 55, are taking lump sums from their pension pots, even though they might still be working and not truly retiring.
The need for financial guidance and advice, therefore, has never been greater. And this applies not only to those who are looking to replace lost income, it also applies to those who were already close, to or at retirement, and had been planning for years to take income at an anticipated rate. The fall in the stock market and in the size of pension pots has significantly affected – even derailed, in some cases – people’s retirement plans.
Add to this those who might have built up life savings but might not be making the most of their money, regardless of the pandemic – the people who should be getting help, regardless. It could be that the funds are dispersed across many different accounts – maybe a few pensions, an ISA, and a savings account. Some will be stuck in savings plans that might have been taken out over a decade ago, when the financial world was very different, and they might now be getting nibbled at by unnecessary charges and costs.
Then there is the spectre of so-called “pound-cost ravaging” – the combined impact of volatility drag and sequencing risk, amplified by withdrawals from retirement portfolios – which can deplete pension funds quicker than expected, wreaking major havoc to clients’ retirement plans.
People entering or in drawdown at this point would benefit hugely from a consolidation review and a financial plan review, so they at least know their funds are in the most appropriate vehicle to make the money go further, and to understand whether they can still expect the monthly income they were hoping for.
Therefore, there's never been a more important time to engage with your customers and clients to make sure they're not setting themselves up for a fall.
So if the pandemic is impacting people's finances in a big way and financial advice and guidance is more important than ever, the industry is going to have to work out how to do this remotely. Not only are consumers nervous about face-to-face meetings, we are also seeing a huge reduction in access to physical branch and office venues.
In the last month, the media has been full of stories about wealth mangers and banks inviting their advisers to work at home. One particular financial institution – which still has significant targets for the year in terms of new revenues and new asset inflows – has 750 branches closed. These venues represent their normal route to new business.
So, therefore, how are they going to maintain revenue? They’ve got to rethink their plans about how to best engage with their clients.
This is a question that doesn’t just touch high net worth advice services being supplied by private banks, wealth managers and financial planners. It’s also an issue for high street banks and building societies, whose customers have far less opportunity – because of social distancing and branch closures – to drop by and get some guidance or advice on, for example, a mortgage, loan or savings account.
Digital advice and guidance offers a solution to both the masses and those at the wealthier end of the spectrum. On a simple advice journey – for example, opening an investment ISA – the customer really doesn't need to speak to anyone; it can be a completely digital experience. Whether you’re a bank, building society or other financial institution, it’s easy to enable people to save and invest in the right way through a digital channel that fully embraces your brand, tone of voice and house view and the way you want to work and service clients.
On the more complex end, digital still plays a part in two crucial ways. One, because at the front end, you can gather important information about people's needs at the fact-finding stage without having to have an adviser physically involved at this stage.
Secondly, technology can also be deployed to do the number-crunching of the solution mapping, quotations and the report writing, enabling advisers to spend more time engaging with more clients and to get involved in the more complex issues.
However long the pandemic lasts, this is a challenge that isn’t going away. We’re not going back to the way things were. Now is the time for every financial institution and advisory service to take action to digitise and automate their businesses so they can emerge into the post-COVID world in a position of strength.
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