Financial professionals must adapt to new market and political realities: report

The first part of 2022 has been a difficult ride for investors and financial professionals. Supply chain disruptions, inflation, interest rate hikes, the Ukrainian invasion and a volatile stock market are testing the growth opportunities of financial professionals.

The Natixis Global Survey of Financial Professionals, The Big Reset, which surveyed 2,700 professionals in 16 countries looked at what the above and other challenges hold for business growth. Four key takeaways include:

• You need more than markets to grow a business.
• Investment assumptions need to change with the fundamentals.
• The hardest thing to manage may be client expectations.
• Business models will need to adapt to emerging client needs.

Investors saw bull markets as high as 20%–30% over the past two years. Financial professionals also saw their book of business grow accordingly. Outsized market performance made it easier for professionals to increase their assets under management and eased the pressure to find (and win) new clients and new assets.

However, in 2022, the job has become much tougher, says the report. Surveyed professionals say the median number of clients that they will need to add annually over the next three years to achieve their growth is 20.

Unfortunately, winning new clients isn’t the easiest way to grow. Nearly half of those surveyed (49%) see it as the most challenging of all growth drivers. Recognizing it takes time to pursue new clients, some may hope to enhance operational efficiency in their practice. But 43% say the investment in technology, training, and other initiatives are also a challenge.

Success will come by demonstrating value beyond asset allocation (49%), building relationships with the next generation (45%), client retention (40%), and access to technology (38%), streamline client base (25%), succession planning (24%), and meeting the demand for crypto currency (16%), according to the report.

Despite the many challenges, financial professionals are optimistic, seeing better days in the second half of the year. On average, they project a market rebound in most major indexes from near-bear market territory to post gains by the end of December, including 5.8% for the S&P 500 and 6.4% for the MSCI World index. Financial professionals were more likely to say equities are appealing (39%) than not appealing (31%). Another 30% say the environment has not changed their views on the appeal of equities either way.

With both stocks and bonds experiencing corrections, investors’ survival instincts are kicking in and nearly three-quarters of professionals (73%) are hearing clients ask, “Do I need to get out of the market now?” Even more advisors in North America (82%) are getting the same question from clients.

Over the past two years, pandemic protocols have forced business to operate remotely. However, financial professionals have found that tried and true strategies have generated their business growth. Seven in 10 (72%) say client referrals have helped move the needle, including 92% in Canada, 90% in Australia and 86% in the US.

Referrals from accountants, lawyers and other professionals (48%) have also helped drive growth. In-person events and experiences such as client seminars and dinners proved to be effective for one-third of professionals (34%). About one in five also say that social media has been effective in their prospecting efforts. Professionals in Singapore (45%), Colombia (43%) and Hong Kong (41%) had the greatest success with social, while smaller numbers in Switzerland (5%), Germany (9%) and the US (9%) found it generated assets.