Even the most successful financial advisory firms have felt the negative impacts of COVID-19.
That’s among the latest findings revealed in Nationwide’s “Advisor Authority” study, which found only 57% of top advisers and financial professionals believe their practice will grow in the next 12 months, a sharp decline from 81% who said the same in 2019. Additionally, these advisers cited the pandemic as a key concern when thinking about the success of their practice.
Powered by the Nationwide Retirement Institute and conducted online by The Harris Poll, the study surveyed 2,500 advisers and financial professionals. It defines “successful advisers” or “top advisers” as those who earn a personal annual income of $500,000 or more from their advisory business or who individually manage assets under management (AUM) of $250 million or more.
The study finds that even though only 37% of high performers reported an optimistic financial outlook last year, many are looking ahead to enhance the profitability of their practice in the coming year. Fifty percent of top advisers said adding new clients will be their top priority to enhance profitability.
High-performing advisers also indicated health and safety for employees (31%) and themselves (31%), digital remote work strategies (28%), addressing decreased profitability (28%) and digital experience/self-service tools for clients (27%) are top practice management concerns related to the pandemic.
“The pandemic was an outsized challenge for advisers and financial professionals of every level, but the most successful advisers are adopting a CEO mindset to protect their clients and their practices,” says Craig Hawley, head of Nationwide’s annuity distribution, in an interview with PLANADVISER. “This is marked by several traits, including putting clients first, committing to an exceptional customer experience, leveraging technology and being bullish on M&A [mergers and acquisitions].”
As advisory firms became more reliant on technology as a result of the remote work environment, top advisory businesses evolved their practices to enhance profitability. Financial advisers turned to webinars, audio, short-form video content and even started advertising online.
Now, Nationwide says more firms are looking to adopt digital platforms in the coming year, as 22% of successful advisers said they are adding new technology while 17% are consolidating their digital experience.
Thirty-seven percent of top advisers indicated that adding digital features helped them effectively serve clients remotely, while others said it freed up time to focus on one-on-one relationships with clients (31%) and provided more personalized, holistic planning (30%). When asked what technology would help better serve their clients over the next 12 months, 29% mentioned e-signature solutions, 26% indicated financial planning software tools for risk management and 19% voted for customer relationship management (CRM) processes.
The market volatility experienced last year made many worry about a potential economic downturn in 2021. The Nationwide study found 80% of successful advisers are concerned about an economic recession in the next 12 months.
As a result, protecting against losses outranked all other client concerns for all advisers and financial advisers, according to the study. Ninety-five percent of top advisers said they have strategies to protect their clients’ assets against market risk while 96% said they have strategies to protect clients against outliving their savings.
More than eight in 10 (82%) of all advisers said their clients would feel more secure if a portion of their portfolio was invested in an annuity and 77% said they would choose an annuity in the next 12 months to protect against market risk. Breaking it down to top advisers, 79% said their clients would feel more secure if they were invested in an annuity and 81% said they would choose an annuity option within the next year.
The Nationwide study finds that top advisers are focusing their attention on Generation X workers. When asked which generation of investors would be their primary target in the next 12 months, 37% indicated this generation, which is in the middle of the workforce, as they are more likely to feel squeezed by the effects of the pandemic. Other advisers said they would focus on Millennials (28%), Baby Boomers (19%), Generation Z (10%), Matures (those born in 1945 or earlier) (1%), and 7% said they were targeting all generations.
The most successful advisers are directing their attention toward wealth changes. These advisers are more likely to have a strategy in place to retain heirs of current clients, at 84% versus 68% of all other advisers, according to the study. For those with a strategy, working with clients’ heirs in the financial planning process (38%) was their top approach, along with creating multi-generational teams and partnering with estate attorneys.
“Targeting new clients and retaining the heirs of current clients are important components of both the CEO mindset and enhancing practice profitability,” Hawley says. “When targeting new clients, successful advisers and financial professionals are interested in younger generations, including Gen Xers and Millennials, and they are also more likely to change their marketing strategy to reach these individuals. To retain heirs, successful advisers are open to building a multi-generational team, offering innovative wealth transfer solutions and partnering with experts such as estate attorneys.”