Boosting the Advisor/Client Relationship

There’s more to the silver lining outlining the dark cloud of the COVID-19 pandemic than just the fact that more Americans turned to financial professionals for help during the crisis.

No doubt, COVID-19 has been a wild storm. But on the sunny side of the cloud are opportunities – side effects of the experience, pardon the medical pun – with the possibility of fortifying the planning relationship between advisors and clients.

Emergency Fund Awareness

The economic shutdown and cashflow stranglehold associated with the COVID-19 pandemic has raised the awareness of the necessity of an emergency fund. According to a mid-summer 2020 Bankrate survey, 35 percent of the 1,006 respondents admitted they have less money saved in an emergency fund after the height of the pandemic versus the amount of money they had socked away before the pandemic. Only 16 percent of respondents indicated they were “comfortable” with the amount of savings they had last summer. Since then, according to the U.S. Bureau of Economic Analysis as reported by Next Advisor, more Americans have increased their personal savings rate, which is the percentage of income one has remaining after taxes and spending each month. In March 2021, that percentage was 12.6 percent. In April, it jumped to 32.2 percent

Used to be that the discussion of putting together a rainy-day fund was one advisors prodded heel-dragging clients into having.

Not anymore. Not after a global pandemic that saw long lines for basic food staples and unemployment processing systems failing just when a steady influx of cash became even more important to American households.

“About a year ago, the conversations were more about, ‘How can we set aside money for retirement?’ or ‘How can we set aside money for college?’” Juan G. Hernandez Ariano, director of WealthCreate Financial in Houston, Texas, told Bloomberg.com. “But I would say 50 percent or 60 percent of the conversations right now are about, ‘How can we set aside more money for emergencies?’”

Now is the time for advisors to revisit the topic of beefing up the emergency fund while the impact of 2020 is still fresh on the minds of clients.

Holistic Financial Care Gets Elevated from Being Just a Catchphrase

The move by financial advisors to more fully embrace holistic care is yet another side effect of the pandemic. In a recent survey by Broadridge Financial Solutions, Inc., of New York, 51 percent of financial advisors indicated they used 2020 to accelerate the transition of their advisement model from focusing solely on investment management to a model including guidance on auto and home purchases, tax planning, emotional and physical well-being, and preparing for potential high costs of health care as clients age.

Eight out of every ten advisors said they expected to be part of a team providing an array of financial services within the next three years rather than working as a solo practitioner.

“Holistic service can’t be a buzzword anymore,” said Stan Gregor, CEO of Summit Financial based in Parsippany, New Jersey. “Investors want an advisor who can meet all of their financial planning needs, providing objective advice tailored to their unique lives.”

That sentiment is echoed by Scott Reddel, managing director of Accenture Capital Markets & Wealth Management in New York, New York, in an article published on FinancialPlanning.com.

Reddel believes “the convergence of insurance and wealth management” will only accelerate further in 2021 as an increasing number of wealth advisory firms “tuck in” insurance specialists under a burgeoning umbrella of one-stop financial services shopping.

“Advice won’t be centered around just managing investments – it’s about helping clients with their total financial and emotional picture,” wrote Reddel. “The advisors of tomorrow will move beyond the pure investment portfolio space and provide advice on non-investable assets, including life insurance and pensions, as well as non-bankable assets like real estate.”

Anticipating and Planning for Upcoming Transitions

Retirement.

Downsizing your home.

A dementia diagnosis.

All of these things – and many more – represent the “what ifs” life throws at all of us. Advisors are uniquely positioned to alert clients of what these possibilities could mean for their financial well-being. The alert is accompanied by an end goal achieved by the creation of plans that are ready to enact if some of those “what-ifs” become reality.

A recent online survey by Investment News Research and Equitable collected data from 360 advisors nationwide. The research found that a majority of advisors expect discussions with clients centered on emotional, physical, and mental well-being as well as health care and real estate downsizing to increase either slightly or significantly in the next five years.

For each of the above-mentioned subjects, the advisors rating in the “slight increase” ranged from 47 to 55 percent. The advisors rating “significant increase” varied from 17 to 33 percent. Overall, the percentage of advisors anticipating more conversations not just about investments ranged from 72 to 84 percent of those surveyed.

“One of the things that has been missing is acknowledging the impact of life transitions,” noted Joan L. Sharp, founder of River Family Advisors located in Wilmington, Delaware.

To hone her skills in helping clients transition, Sharp earned the Certified Financial Transitionist® (CeFT™) designation from The Financial Transitionist Institute based in Palm Beach Gardens, Florida. It is a year-long training program for financial advisors with five or more years of experience who also hold at least one other professional certification.

Sharp views it as her go-to tool she uses to help clients dig deeper into what their goals are for a coming transition.

“Understanding what is important to investors, meaning deeper than what the investor is articulating to the advisor and asking what is the transition they are in or approaching,” is a skill Sharp said she acquired via the training. “It teaches you how to have a dialogue with the investors and guide them.”

In an article published online by Investment News, Joseph Coughlin, director of the Massachusetts Institute of Technology Age Lab, discussed findings obtained via the lab’s Preparing for Longevity Advisory Network regarding how the pandemic changed the advisor/client conversation.

“Advisors are finding that the pandemic has primed clients to have more intimate conversations about emotionally charged topics, such as health or even downsizing from the family home,” wrote Coughlin. “Leading advisers are not just rethinking the many modes in which they can engage clients, but what they discuss, when and how.”

After the Read

There exist many cliches that could sum up this discussion.

Is the glass half full or half empty? Where there’s a will, there’s a way. It’s all about attitude.

Perhaps this one works best: Change is the only constant.

Advisors and clients embracing the idea that adaptability is key to survival will have little trouble with the three side effects listed above.