Seismic Shifts: Wealth Management is Evolving Rapidly in the Season of COVID-19

Research indicates many practitioners are bearish, but a commitment to Committed Beneficial Interest can bring new growth and opportunities for all

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Q2 2020 hedge fund letters, conferences and more

As 2020 began, experts heralded the new season of wealth management as “the winds of change.” The irony is not lost on any of us.

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As the COVID-19 pandemic blazed through the U.S. and world like a mighty swath of destruction, the wealth management industry – and its client base – has been whipsawed into a level of volatility we’ve seldom seen.

According to the 2020 Trends in Investing Survey by the Financial Planning Association® (FPA®), the Journal of Financial Planning, and Janus Henderson Investors, the upshot of our current condition is that financial advisers are feeling bearish about our economic outlook for the next six months (and potentially more).

Not surprisingly, the survey shows the direct impact the pandemic is having on advisors’
outlooks. Particularly graphic: when President Trump declared a national state of emergency on March 13—midway through the survey—it was immediately apparent that advisor outlook had turned on a dime. Results from March 7-13 showed advisor outlook as neutral or somewhat bearish, with just 12 percent selecting “bearish” and envisioning doom. After March 13, nearly one-third (31 percent) were reporting bearish opinions for the six months to come.

Another impact is that advisers are now opting for equities over cash and equivalents. Twenty-five percent will increase their use of individual stocks, compared to 15 percent in 2019. Meanwhile, 14 percent will decrease the use and recommendation of cash and equivalents for the remainder of 2020 (nearly triple the 5 percent who did so in 2019).

What should financial advisors do now?

Clearly, all of the U.S. has been severely affected. Work stoppage and asset value decline has taken a significant bite out of family wealth. Retirement plans are being disrupted and the financial outlook for many American families is suddenly and dramatically bleak.

Thousands of businesses and entire industries are affected, although the new propensity for some to surge while others are fading is paving the way for rapid innovation as well. Industries like travel and hospitality, for example, have stopped on a dime or retreated as they work to re-tool, while remote work technologies and streaming entertainment now flourish.

Financial advisors are universally and personally affected as well, which I discussed in an interview with Denis Walsh, the CEO and President of Money Concepts Capital Corp. Money Concepts is an independent broker/dealer in Palm Beach Garden, Florida that is 40 years old, with 170 U.S. locations. The company provides turnkey and holistic solutions for wealth managers to help them achieve growth by fostering trusted and partnerships with a steadily growing clientele.

Walsh provided suggestions on what the wealth managers should be doing now, during the pandemic and beyond, to maximize the process of recovery for the clients they serve and to expand and grow their own success through increasingly stronger service and advisory offerings.

Emerging strategies for 2020

Many firms are increasing their automation and technology abilities to help ameliorate the loss of revenue in a down economy by giving professionals the wherewithal to support a larger book of business with greater efficiency and ease. Stronger technology is vital; however, Walsh maintains the time is high for professionals to develop and uphold a culture and vision of “CBI” – Committed Beneficial Interest.

“With a large reduction in the number of professionals and increasing lack of client trust in the financial services, a course correction is critical,” Walsh says. “Unfortunately, the loss of confidence has been duly earned by mercenary-minded Broker Dealers. Advisors are poorly supported and pushed by unrealistic product quotas. Client concerns are overlooked as government regulations have ineffectively attempted to fix the issues.”

“Legislation of morality is futile,” he concludes. “You either have CBI, or you don’t.”

Evolving to an era of Committed Beneficial Interest

In a culture of CBI, firms and practitioners recognize the need for systemic change. They reduce the importance of commissions and fees while elevating trusted relationships to their proper position of prominence.

“There should never be an ‘eat what you kill’ mentality to selling financial solutions intended for the good of the client,” Walsh said.

Learning to embody the concept of “Love What You Do”

As a trusted financial advisor, the ingrained approach of “love what you do” should permeate your personal and company culture in every season, but especially during the cataclysmic events of this year. “CBI” leads to an emphasis on associate and client awareness, personal freedom, a and real and renewed passion for entrepreneurial thinking at every turn.

For example, with a focus on CBI, my own financial advisor called my cellphone in March, unsolicited, to offer information and assistance on the SBA EIDL and PPP programs. His firm was not an SBA provider and there was little revenue incentive to offer me and other valued entrepreneurs he supports with aligned and expert advice on how to manage these opportunities well.

In a season that has put every business in the position of needing to revise business practices, study and execute emergency loans and funding while also managing the fears of our own employees and customers, this practitioner exhibited CBI by calling, uncompensated, to offer his help. This is the same advisor we have worked with for 20 years, through his associate years, rise to partnership and even his firm’s acquisition into a much larger company. His extra mile effort in the face of the hardest crisis we or he has likely faced will not be forgotten.

Walsh agrees, noting that when financial advisors live and work within a culture of CBI, they are motivated to deliver the very best wealth experience for all of their clients. With a healthy CBI culture, both practitioners and organizations will thrive.

Leveraging the power of open and non-proprietary technology

Consistency and transparency are vital in the work between practitioner and client and among the members of the organization. The concept of CBI and love what you do extends to the broader organization and to its clients as well. Choosing non-proprietary technology allows practices to adhere to overall workflow and reporting requirements while also maintaining the flexibility to accommodate familiar or required programs to meet its varied clientele needs.

Navigating regulation with care

There have been many times during the current pandemic that regulatory requirements have evolved by the day. Requirements are confusing and on occasion are even conflicted. Stories abound of larger clients receiving first and preferential treatment in obtaining emergency while the smallest and most vulnerable customers have languished.

Walsh admonishes practitioners to uphold Fiduciary requirements in a way that is in the best interest of its clients, in every case. As poor decisions come to light, financial organizations and their customers who’ve abused regulatory rules have suffered. Whether the decision is uncovered or not, mercenary tactics can have no foundation in a CBI culture. With true love of clients and the community, a financial practitioner will follow Fiduciary standards in every case. This will not only ensure trust and customer loyalty but will ensure the success of both client and financial advisor over time.

Learning that the concept of “love what you do” extends to communities, too

For advisory entrepreneurs who truly care for their clients, there is no better foundation for a broker/dealer than to love what you do in the service of those who love what you do, Walsh maintains.

For example, Money Concepts International is one of two corporate sponsors, together with Envestment Money Guide, of The International Association of Registered Financial Consultants (IARFC®) National Financial Plan Competition. This is a program Money Center has participated in for six years, thus far. Typically, the students who compete in the Finals present their plans in person to IARFC member professionals. Due to COVID, 2020 Finalists rendered their presentations virtually, but the energy and innovation of these upcoming practitioners is infectious just the same. I was especially pleased to note the first-place winner was from my own U.S. region, as a representative of Utah Valley University (UVU) that is the alma mater for three of my sons.

Said Money Concepts’ Barry Daley, MRFC, about the competition: “These kinds of things are growth opportunities. The more you step outside your comfort zone, the more confidence and polish you will acquire as you progress in your career.”

The 31 percent of practitioners who are bearish on the U.S. economy for the remaining months of this year may be correct their assessment. But by truly loving their customers and communities and the impact they are able to make with optimal actions, not only will their businesses survive, they will continue to thrive in every economic condition in 2020 and in the years and decades to come.