What You Need to Know
- An Advisor360 survey finds shifts in communications, trading, portfolio rebalancing and how investment objectives and goals are defined.
- There's been an uptick in the number of goals created by advisors seeking to provide clients with more long-term portfolio stability.
- COVID-19 has given advisors new opportunities to collaborate with clients digitally with a focus on investment goals and rebalancing.
As every wealth management professional understands, investing isn’t just about numbers. The process of finding and retaining clients, and helping them achieve their goals is often a psychological exercise for advisors, especially during times of market volatility.
New research from Advisor360, however, is revealing the ways in which the pandemic has shifted how advisors and investors behave, communicate and invest.
Our team analyzed our extensive data warehouse, which contains more than 400 direct data feeds spanning investments, insurance, banking, security masters, and more to look at software usage across home office users, advisors, and advisors’ clients in multiple software sleeves.
We analyzed the ways in which advisors and clients have utilized technology during the pandemic, which revealed changes in how they communicate, trade, rebalance portfolios, and define investment objectives and goals.
Looking at data 12 months prior to the major COVID-19 outbreak (pre-March 2020) and the 12 months since, the year-over-year differences in the communication and investing behavior of both advisors and investors is indicative of the global fear and uncertainty caused by COVID-19.
In the wake of this crisis, advisors have had to quickly adapt their business practices to meet the needs of their increasingly anxious clients, finding new ways to keep them calm and their investments on track without face-to-face interaction.
Here are the findings from that data:
1. Shifts in Investment Objectives
When market turbulence occurs, investors tend to lose their long-term perspective on investing and become more protective of their assets.
Thus it makes sense that, as the markets wobbled and plunged in February and March of last year, we saw investors across the U.S. increasingly turning toward different, often more conservative investment strategies.
In our analysis, we found there was a 17% increase in changes to investment objectives since March 2020, which illustrates how the advisors on our platform worked with their clients to mitigate risk and proactively anticipate future market shifts.
2. Changes in Communications
Since the onset of the pandemic, there has been a marked increase in digital communications between clients and advisors. Our data showed a 15% increase in text messages (SMS/MMS) sent from clients to advisors and a 14% increase in secure messages sent via our client portal.
While the industry was in the midst of a digital transformation before the last year, the onset of the pandemic sped up the conversion from old-school to electronic communication, forcing advisors to fully digitize their practices.
Over the past year, many RIAs have made the transition from mailing out quarterly statements (e.g. QPRs) to providing clients with instantaneous, round-the-clock access to their portfolios and performance reporting through our secure client portal.
While we saw heavy spikes in portfolio rebalancing at the end of Q1 and start of Q2 2020, these trading patterns have since returned to normal.