Vanguard CEO Tim Buckley Vanguard CEO Tim Buckley

How can advisors best serve their clients during these unprecedented times?

It’s a hot topic in the industry and the focus of a a recent webinar for advisors and press held by Vanguard CEO Tim Buckley and Tom Rampulla, its managing director of Financial Advisor Services.

Here are some key highlights:

Engage with clients virtually, but don’t forget in-person interactions for the future.

“Virtual has worked pretty well,” Rampulla said. There’s a lot of enthusiasm around virtual engagement but in-person still matters a lot.”

He cited a Vanguard survey showing that 87% of retail investors were satisfied with their virtual interactions with advisors and 90% who had video conferences with advisors found them as good or superior to in-person meetings. Thirty percent expect to go virtual for most of their interactions with advisors.

“You’re going to see a shift to virtual and we’re all going to have to make that shift,” Rampulla said.

He envisions advisors using a “dual mode of engagement” in the future, which will allow them to cover more clients, including those who aren’t local, and use in-person meetings for the client’s most important and sensitive topics.

But Rampulla cautions that, in a virtual environment, advisors “have to figure out ways to be more engaged with clients, to be more than a face on a screen.” 

“Embrace the technology,” said Buckley. “Meet clients where they are. Virtual models are more than just a platform [and know] when to meet in person.”

Vanguard is in the process of “re-architecturing” its virtual advisor platform and has been testing the new software with a couple dozen advisors over the past six months, according to Rampulla.

The firm is also in the process of mining data from 8 million retail clients over the past 45 years to learn more about how they invest — research that can help advisors better serve their clients.

Bonds still have value despite low rates.

A lot of folks question the sanity of holding bonds in a low-yield environment, but they have proved their worth,” Rampulla said, noting that global bonds (hedged) gained 3.5%  while global equities lost 6% in the first half of the year.

“Bonds are there to add balance to a portfolio, to steady the ship in the storm,” Buckley said. Equities are the sail that drives you forward.” He noted that the 60/40 balanced portfolio “is still viable,” discounting talk of its impending death. “I’ve heard that before.”

The stock market is not disconnected from the economy …

“The current economic environment is a lousy predictor of future returns,” Buckley said. “Markets are forward looking. They care about the next five years more than the next five months.” He recalled the financial crisis in 2007-2009, when equities returned double digits (that was only in 2009) even though unemployment reached double digits (only in October 2009).

“We believe equity markets are quite rational now,” noted Buckley, adding they are buoyed by supportive policies from central banks and fiscal spending by governments.

But he warned that this is not a time for investors nor advisors to try to identify different market winners. “This is a time for diversification and discipline. There is too much uncertainty out there.”

To that end, Rampulla noted that advisors need to “be present” for their clients, helping them  rebalance their portfolios as they guide clients to achieve their goals, acting like behavioral coaches to prevent panic selling.

“Clients never forget that” he said. “It builds trust.”

Muni bond investors have been the most skittish among Vanguard retail investors, panic selling and locking in losses, Rampulla said.

… But the U.S. economy is on life support at present.

“Activity is very limited … [and]  and companies are not making a profit,” said Buckley (Second-quarter GDP declined at an annual rate of 33% and the latest weekly jobless claims rose for the second consecutive week, up 1.434 million).

“The shape of the recovery will have the shape of the virus,” Buckley said. “That’s the only shape that matters.”

But that shape can mutate, which can undermine efforts for a vaccine, said Buckley.  He doesn’t believe demand in the economy will fully recover until there is a working vaccine.

There are “challenging times ahead,” said Buckley who warned advisors against trying to predict the future. “We’re not out of this, and none of us have ever been through times like this.”

— Check out April Rudin: Pandemic Forcing Big Shift in Advice Industry on ThinkAdvisor.