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May 27, 2020 at 09:00 AM
The changes that firm leaders are making in response to the COVID-19 pandemic will be felt for years to come.
As with other segments of our society and economy, COVID-19 is changing the independent advisor business. To determine how — and how much — in early March, our firm launched an ongoing survey to track behavioral changes in the industry within advisory firms in response to the pandemic.
With a data set of 251 responses so far, the 2020 Herbers & Company Culture and Client Service Study finds that, in a short period of time, COVID-19 has brought about transformations in the way advisory firms operate and serve their clients and how leaders make decisions. Here are our key findings:
1. Financial advisory firms are prioritizing operational procedures over innovation and marketing.
We found that 78% of firm owners are putting their primary focus on revamping and expanding their firms’ operational processes and design. By focusing their now “virtual teams” on operations, advisory firms are cutting costs by streamlining operations to expand profitability.
In addition, we found that 59% of the firms surveyed reduced overhead expenses and decreased shareholder dividend payouts, to maintain profitability. At the same time, we found that less than 2% of the firms surveyed laid off any staff or employees.
As for marketing, less than 6% of firms hired any extra help, and only 7% are conducting marketing campaigns to attract new clients during the past two months. The firms in our study responded that they have moved their focus to organic growth programs, generating client referrals.
Taken together, this means most firms are prioritizing: stabilizing their business, expanding their services and improving on those services.
As for innovation, 12% of firm leaders are creating something new for their firms. What they are creating, which seems to be under “lock and key” for some, is still unknown. What we do know is that a surprising 10% of firms surveyed said they are turning to an “innovation mindset,” rather than a “growth mindset.” Or, put another way, these firm owners are focused on making their businesses better, rather than bigger.
2. Advisors are focused on expanding client experience. Today’s firm owners are reformatting strategic plans, with a focus on client service programs.
Once leaders stabilize their businesses to the point where they are running smoothly under the new circumstances, they are looking toward upgrading their “client experience” to address a new set of client needs in the current crisis. This involves more client contact and “handholding” within the digital environment.
This isn’t much of a surprise. With fears about the pandemic, the economy and financial markets, clients need as much reassurance and handholding as their advisors can provide. We found that most firm owners are aware of this, and along with their staffs, are expanding their “client experience” to include much more contact, information, access, and timely responses as possible.
3. Peer groups are cutting out the middleman in mergers and acquisitions.
Our survey uncovered that advisors get their information and advice about the current, changing situation from two primary sources: written articles and peer groups. Of those two, we’ve found that peer groups have gained the most “mindshare,” or influence, in recent years compared to the last time we faced a nationwide crisis in 2008. However, written articles were overwhelmingly cited as the information source that advisors turn to for information about industry and financial market trends.
