A post-pandemic upgrade for advice

This article appears in the June 2020 issue of Advisor’s Edge magazine. Subscribe to the print edition, read the digital edition or read the articles online.

Everyone’s talking about what the post-pandemic world will look like: people will work from home permanently, restaurants and entertainment venues will enhance their offerings to lure consumers out of their cocoons, and the world will increasingly recognize the value of advisory services.

I made that last one up, I admit, but it’s a forecast backed by evidence.

In the midst of a health crisis and mass income losses, advisors have been offering support to those in need — from free advice to empathetic messages on social media. Canadians who lost jobs or were impacted in other ways received help with emergency cash-flow plans and with navigating government support.

Advisors’ actions can easily be described as putting others first. The challenge will be to make client-first actions as easy to identify in normal times.

In the CFA Institute’s May 2020 trust survey, investors say the most important attribute for an advisor is whether they can be trusted to act in investors’ best interests. However, only 35% of investors say their advisors always put their interests first.

Part of the problem is the industry focus on market performance. In turn, advisory value gets expressed as a performance measure. For example, Russell Investments Canada calculates that the value of an advisor in 2020 is 2.88%, based on annual rebalancing, correcting behavioural mistakes, tax-efficient investing and planning.

That measure is certainly important because it demonstrates advisor competence. But the measure is incomplete without the trust that comes from demonstrating to clients that they come first.

If the advisor can’t correct behavioural mistakes or identify tax inefficiencies because the client doesn’t feel comfortable disclosing personal information, then performance will lag. This could happen if the client doesn’t feel listened to, or hear their concerns reflected back to them.

A client’s portfolio performance may improve if the advisor does the legwork to analyze a new responsible investing fund that aligns with a client’s long-held values, or chooses a cheaper but equally suitable product. The survey found that 83% of advised clients want their advisors to offer more than proprietary products. Post-pandemic, investors will likely be even more cost-sensitive.

Putting clients first also goes beyond performance, as any advisor knows who’s taken the time to check in with a client who’s sick, scared or alone — an important consideration in a time of poor market returns and widespread anxiety.

In fact, the pandemic may have revealed novel ways to put clients first, based on what clients thanked you for, or how you were motivated to help. Maybe that’s sharing stress management techniques, providing a comparison of local grocery delivery services or developing seminars for people who have been laid off.

Regardless, you should communicate the ways you put clients first, even in the absence of regulatory requirements. The CFA survey found that 84% of investors — and 96% of investors under the age of 35— trust their advisors more if they tell clients they comply with a voluntary code of conduct.

What the post-pandemic world will ultimately look like is anybody’s guess, but clients will need help navigating it. Demonstrating the same care, understanding and versatility you showed during the crisis would be a great start.

Michelle Schriver is assistant editor at Advisor’s Edge. Reach her at michelle@newcom.ca or on Twitter.

Michelle Schriver

Michelle is Advisor.ca’s managing editor. She has worked with the team since 2015 and been recognized by the National Magazine Awards and SABEW for her reporting. Email her at michelle@newcom.ca.