Wealth management response to COVID-19 has been saved
This is active management’s time to shine. While passive investing has dominated during the recent record-length bull market, active management poses advantages during volatile and turbulent times, and firms that transform people, process, and technology within their equity platforms could be better positioned to grow assets and win back investors into active strategies. While outflows have been pronounced, particularly from equity strategies, the crisis provides an opportunity for active managers to demonstrate value against other strategies, showing their abilities to pick individual winners and generate alpha compared with typical index approaches.
Proactive advisers and firms are driving client discussions about actively managed products, as a renewed interest in such strategies has arrived. Product manufacturers may also seek to enable this spike in interest through performance-based features that have yet to achieve mass appeal.
In times of higher volatility, there is a premium on customized, human, and timely communications with investors. With the shifts to virtual business practices, many wealth managers have aggressively reached out to their clients by phone to make it a “moment that matters” and build further goodwill through a human touch.
Firms with larger customer bases have relied on electronic means, emails customized through artificial intelligence (AI), or social media to connect. Still, some other firms have not accepted the trade-off between human and digital engagement models and have sought a third way to further tailor electronic communications to individual customers, by mixing analog and digital communications.
In times of uncertainty, market corrections, and high volatility, the value of financial planning and professional advice becomes clearer to many retail investors. The impact of COVID-19 on wealth management should, therefore, accelerate the trend toward more comprehensive financial planning and advice at the heart of the relationship between retail investors and their wealth managers.
This kind of service level is difficult to maintain within a traditional commission-based brokerage account. So, firms should consider continuing to focus their asset-gathering efforts on fee-based services. Fee-based assets have often been “stickier” for firms and advisers, while such arrangements also offer investors access to more holistic financial planning advice. Deep relationships with clients are profitable relationships, and firms and advisers should continue to strive to deepen that relationship in troubled times.