Financial advisers are being pushed in new directions amid the spread of the coronavirus, with clients leaning on their planner as a trusted guide and someone that may contain more answers than they really do.
The desire of advisers to care for clients and this opportunity to demonstrate their value needs to be balanced with a responsibility to avoid giving advice out of their professional purview.
The present crisis is unlike any seen since the Spanish flu, over a century ago. While the current crisis shouldn’t be nearly as traumatic, we do know the world will undergo tremendous upheaval. Along the way, we will discover a lot about how people deal with anxiety and adversity.
For advisers, that journey has already begun, and the psychology behind the client interactions is shifting. Clients are clamouring for information, for reassurance on everything from the viability of their retirement plans to the likelihood that they’ll run out of food or the best way to help their elderly parents.
“I am being inundated with client calls and emails at the moment,” says Amie Baker from Rekab Advice. “I’m dealing with a lot of people that are panicky and not thinking straight.”
The dominant theme among clients, according to Ben Maw, an adviser at BPM Financial, is concern for portfolio valuations. Reassuring people about their life savings is a primary role for any adviser right now; even though clients are largely cognisant of what they’re invested in, crisis events have them second guessing their position.
“I’ve been reiterating the defensive portion of the portfolio,” Maw says. “Yes, the markets are down considerably, but we don’t just have equities – we have defensive assets and this is why.”
But what Maw is finding, like many advisers, is that clients are looking for reassurance on a broader level. Over time, a financial adviser becomes a figure whose opinion is trusted and respected, so it’s only natural for clients to look their way for guidance.
“I think deep down most advisers know when you’ve got a good relationship with clients it becomes more than facts and figures, you become a sort of quasi-counsellor,” Maw says. “As cliched as it sounds a lot of people just want to know things are going to be OK. They want to be reassured about the portfolio, of course, but also about the big picture side of things.”
According to Baker, offering comfort is just part of the job.
“This is where the coaching role comes in, where metaphorically holding the hand and giving comfort takes over from financial advice,” she says.
Demarcating advice and opinion
According to behavioural scientist David Penglase, good financial advisersare also lifestyle coaches. “They’re managing the finances and also the mindset,” he says.
Yet there is a “danger” for advisers in going beyond their financial planning and coaching remit and presenting opinions on non-financial matters relating to the coronavirus. As clients become desperate for information from trusted sources, he warns financial planners against advising on decisions like whether to work from home or take children out of school. Where opinions are given on these matters, he says, it needs to be clear that this is not professional advice.
“When it comes to whether we should be keeping kids at school or not, for example, advisers aren’t the experts in this area so the important thing is to let clients know it’s just their opinion,” he explains. “They’re in the realm of lifestyle advice, so they need to be clear and say: ‘this is just how I feel about it’.”
Himself a public speaker, Penglase likens the situation to when he is on stage; most of what he presents is evidence-based research, he says, but if he strays from that he always lets the audience know.
“Advisers need to be careful, because they can only give advice on what their proper authority allows them to do,” he says. “It’s a moving goalpost, so the advice has to be to listen to the experts and form your own opinion.”
Baker agrees, adding that advisers need to be extra judicious with the subject matter they advise on.
“They certainly don’t want to add fuel to the fire,” she says.
Maw says it’s important for an adviser to avoid imposing their own moral compass on clients.
“You’re not a psychologist or an official counsellor,” he says. “You’ve got to be careful not to impose your own compass on the client, and you’ve got to keep separation on your own ethical standpoint.”
While advisers need to be wary of what they say, Penglase reckons the way they communicate with clients can still be shrouded in warmth, kindness and compassion.
“The humanity things matter,” he says.
Interestingly, I have only had ONE client reach out for some reassurance. Other than him, I haven’t had a single client query. If I was to guess at why not, I’d say it’s the effort we put into client education as part of the on-boarding process. That said, if things don’t settle down soon, the floodgates may open.