5 ways advisors, clients have changed in the pandemic

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.

Even before the pandemic, rebalancing a portfolio was a common response to changing market conditions: When certain stocks outperform or go down, a portfolio can be reallocated in response.

Readjusting a portfolio can be a short- or long- term investment solution, depending on how the client and advisor agree to move forward.

4. Shifts in investment goals

Our data showed that since March 2020 there has been a 19% increase in the number of goals created in our platform by advisors seeking to provide their clients.

This increase in goal creation likely correlates with markets moving quickly up and down, and advisors using this as a tool to calm the nerves of clients who were worried that drops in asset values would not allow them to achieve their goals. 

There was also a slight correlation between those goals being created and investment objective changes (more conservative), with the theory that clients were willing to give up portfolio upside in lieu of reduce their risk (downside), as long as they could still achieve their goals.

5. Remote relationships

The COVID pandemic has given advisors new opportunities to serve clients by collaborating with them on digitally with a focus on client goals. 

Rebalancing portfolios and investment objective changes are part of proactively managing the client portfolios — and expectations — as they are both a means to the end of helping them achieve their goals. 

And as expected, digital communication channels experienced an uplift in the types of communication (e.g. texting and secured messaging) along with communicating more frequently.

Advisors will likely carry these changes into the post-pandemic world, as investors expectations of being served by advisors in digital ways are the “new normal.”

Darren Tedesco is president of Advisor360, a Boston-based fully integrated wealth management SaaS platform for financial advisors.