‘Resilient’ consultancy

Advisor | June 2020

When we think of resilience, we often focus on images of epic heroes such as Maximus Decimus Meridius, the Roman general portrayed by Russell Crowe in Ridley Scott’s epic historical film Gladiator.

What unites a fearless hero (Joan of Arc, for example) and a financial advisor? First of all, their common ability to face and overcome obstacles with strong determination, drawing their motivation from hurdles.

There is no denying that the industry of financial consultancy was able to successfully withstand the first impact of the pandemic. However, its consequences are still rising, and financial advisors will soon have to face yet another challenge.

The industry of financial consultancy witnessed a temporary decrease in assets under management and, at the same time, an increase in the number of clients (+20.000 in March).

What are the reasons behind the success of financial advisors? How did they maintain their positions? And how could they grow as a field while other fields were going belly-up?

The analysis conducted by FINER on 1.200 financial advisors and 900 of their clients starting on 8 March presents some food for thought.

The frequency of communication per week between FAs and their clients has gradually increased (+22%) together with the level of satisfaction (+11%), showing that a proactive attitude is the best response to the volatility of the markets.

Moreover, the ability to support and satisfy long-standing clients while winning new ones allowed for the erection of a strong bulwark.

But some of the credit must go to the banks and financial networks that developed a clear strategy and provided FAs with the tools to implement it.

The most popular strategy adopted by FAs to acquire new clients is DCA – unit cost averaging (42%), followed by composite insurance policies (39%) and the reduction of entry commissions and costs (34%); some of the more strategic offers include a bonus in exchange for a new client (17%) or guaranteed returns for a set period of time in the event of new liquidity (15%).

Acquiring a new client can cost more than retaining an existing one. So, in order to prevent clients from getting out of the markets on impulse, FAs resorted to some old and unforgotten rules.

The first rule is to show clients the historical trends of the stock market highlighting how, in the medium-long term, people have never been let down (45% of FAs). The second rule is to buy when prices are favorable (37%) and to balance the portfolio (32%).

When the going gets tough, the tough get going – and, needless to say, they often win, especially through method and discipline.