A rapid and deadly health toll, lengthy work stoppages, country-wide lockdowns and stay-at-home measures have characterised COVID-19. While the full impact of the pandemic will take a while to understand fully, declining financial markets and a slowdown in economic activity are signs of a global recession that might be unavoidable.
Although safeguarding citizens’ health is the priority for many countries, it is still vital for investment management professionals to learn from the tough times. When normal routines resume, investors will likely hope that their investment managers were working diligently to preserve their assets during these unprecedented times. As Kevin Neal, a former independent financial advisor (IFA) knows, turbulent times drive market volatility that can, in some instances, lead to opportunities or changes in investing decisions. Wealth management professionals, especially, can maintain client confidence in various ways.
Communicate Sound Advice
Providing sound advice should be a priority for advisors in a time of crisis. These professionals should aim to do right by their clients, which entails communicating regularly and resetting financial plans appropriately. Keeping silent can be counter-productive for a wealth manager, especially as lack of communication can lead to negative publicity or even unnecessary scandals. With price drops across many investment sectors, wealth managers would be wise to send notice to their clients early and stay in touch.
The options for keeping in touch during a lockdown lean mostly towards video conferencing apps and tools, highlighting the technology-driven solutions available to wealth managers. A multi-platform approach – which incorporates email, phone calls, video and online – is also acceptable and can work where a wealth manager wants to stay as accessible as possible. Regardless of the method used, maintaining security, privacy and confidentiality will be just as important during the lockdown as it is during regular times.
Advice on Market Volatility
Understandably, many clients will be concerned about the impact of the pandemic on their investments. At the core of their concern will be the impact of volatile and depressed markets on their portfolios in the long-term. High-net-worth (HNW) clients, on the other hand, could be looking to use their liquidity positions to enter into markets; many wealth management clients have diversified portfolios that can withstand the volatility.
Around the world, many central banks slashed rates and provided extra liquidity into the market to cushion local economies from the impact. Still, elevated volatility is likely to continue before the virus is completely brought under control. In response, investment portfolios will likely refrain from taking on risky propositions, while some might be more open to weather the storm and invest in alternative investment offerings.
Ultimately, the message clients have to take home at this time is ‘don’t panic’. COVID-19 has undoubtedly brought significant economic effects that will be felt in the short term. Wealth managers will likely encourage clients to weather the storm and not bail out during these stressful times, noting they should maintain a long-term focus.
For some wealth managers, the crisis is a season to get into active management, especially when looking for quality investment opportunities that could emerge in slumping markets. Having realised vulnerable areas and possibly reduced their exposure, these managers could have extra liquidity to deploy to various investment classes. While it might not be the best of times, the investment business continues to operate. Maintaining discipline based on valuation will be essential.
In times of uncertainty, it’s easy to lose the long-term focus that many wealth managers advocate. However, if there are any lessons learned from the last global recession, it’s that the financial reforms put in place have led to a more resilient system. For sure, certain industries are going to bear much of the impact but – in theory – the investment industry may rebound sooner rather than later.