Gary Skovron.16 June 2020

How has Coronavirus Impacted the Wealth Management Industry?

COVID-19 has not only impacted the global financial markets in unprecedented ways, but also the relationship between clients and their advisers.

Industries have had to rapidly adapt and find new ways to guide decision-makers whilst navigating evolving challenges. Global investment manager Schroders commissioned a survey exploring changes to the wealth management industry and the relationship between advisers and clients during the current pandemic (Schroders, 2020). Here are the three key take-aways, and how ARQ can respond to the problems addressed.

Industries have had to rapidly adapt and find new ways to guide decision-makers whilst navigating evolving challenges. Global investment manager Schroders commissioned a survey exploring changes to the wealth management industry and the relationship between advisers and clients during the current pandemic (Schroders, 2020). Here are the three key take-aways, and how ARQ can respond to the problems addressed.

COVID-19 has not only impacted the global financial market in unprecedented ways, but also the relationship between clients and their advisers.

1. Sustainable investing

The global lockdown brought with it a newfound appreciation of the natural world, as factory pumps lay dormant and the environment was given much-needed time to breathe. Attitudes towards sustainable investing have thus changed to reflect the priorities of a more socially-aware – and in many ways a more caring – population.

These priorities go beyond climate change: 68% of advisers confirmed that, as a result of the crisis, they would pay greater attention to environmental, social and governance (ESG) factors when selecting investments. Meanwhile 88% reported that ‘the coronavirus crisis reinforces the importance of stewardship and using an asset manager that actively engages with company management’ (Schroders, 2020).

The coronavirus pandemic will ultimately reinforce the momentum which has been building around sustainable investment over the past few years; at the start of 2018, global sustainable investment reached $30.7 trillion in Europe, the US, Japan, Canada, and Australia and New Zealand, marking a 34% increase since 2016 [Global Sustainable Investment Alliance, 2018].

ARQ also places a huge spotlight on sustainable investing. Our services empower entrepreneurs to make better-informed investment decisions to build tomorrow’s wealth. In generating added value for investors, ARQ paves the way for investors to put money back into the planet and impact social change.

2. Client communication

The uncertainty generated in recent months has led to financial advisers spending more time than usual communicating with clients. The percentage of advisers speaking directly to more than 25% of their clients in an average month has increased from 36% to 73% during March (Schroders, 2020).

The survey also highlighted that one of the biggest challenges advisers have been presented with is how to generate income for clients against a backdrop of reduction in natural income and dividend suspensions. In particular, advisers have had the responsibility of reassuring clients and preventing them from making hasty decisions in a time of severe market volatility.

COVID-19 has undoubtedly shown the need for new technology-based business models, even just for digital channels to enable more frequent communication between investor and adviser. Similarly, tools like ARQ that offer a personalised, digital solution, help users to navigate this new and uncertain landscape by providing transparent data on investment performance. Additionally, ARQ serves to benefit financial advisers by leveraging technology to better their interactions with clients through the provision of actionable insights.

3. Retirement plans

The wealth management industry will also witness clients delaying their retirement amidst instability surrounding their investments. Nearly 50% of clients approaching retirement have delayed this due to risks such as sequence risk, whereby in a stock market crash, clients maintain their income withdrawals at the same level and effectively withdraw a larger percentage of their wealth portfolio to obtain the same income (Schroders, 2020).

Clients who last year expected their portfolios to return 10.7% per annum will need to adjust their expectations as the markets fluctuate (Schroders, 2020).

Against this uncertainty, ARQ can offer a sense of stability for investors by creating a personalised and independent wealth experience, enabling users to feel in control in rapidly-changing times. Our “know where you stand” and “see where you can be” functions offer transparency and real-time intelligence insights, allowing users to access performance data in order to navigate the challenges brought on by coronavirus.

While the growth in sustainable investing was to be expected in light of recent climate change activism, the coronavirus has only served as a catalyst. What will be more interesting to see is how the restructuring and re-prioritisation of clients’ needs, inside the traditional wealth management business-model, will play out and whether Covid-19 ends up being a turning point in the growth of digital or hybrid solutions.

By Sasha Skovron


Sources: 

https://www.investmentweek.co.uk/sponsored/4016025/iw-industry-voice-covid-19-adviser-survey-key-takeaways

http://www.gsi-alliance.org/wp-content/uploads/2019/03/GSIR_Review2018.3.28.pdf

https://www.goldmansachs.com/insights/pages/gs-research/the-great-reset/report.pdf