The financial advisor is always there, in good and bad times

Financial Consultants and Covid emergency

Investire | April 2020

Financial advisors have responded to the health emergency that has been plaguing our country for weeks with an esprit de corps second only to that of the medical and public security staff.

A well-known Latin proverb – “primum vivere deinde philosophari” – reminds us that physical integrity comes first. Then, it is advisable to take care of our psychological wellbeing. The health emergency and its impact on the financial markets put a strain on the psyche of several end investors, in particular amid the weakest ones and those who are not assisted by a valid professional.

As the stock markets crashed, several clients called their advisors urging them to exit the markets “before it is too late”, as if there was no tomorrow. Luckily, many professionals managed to contain their panic.

The best and most fearless among them were able to convince their clients not only to keep their position, but to even invest. Here is a summary of what a professional, with great calmness, said.

During the last decades, there was no lack of “black swans”: the 1987 crash, the 1990 invasion of Kuwait, the 1998 crisis, the Twin Towers attack in 2001, the Lehman crisis in 2008.

These crises share four characteristics: 1) length: relatively short, from one to four months between the recognition of the event to the crash; 2) their high intensity; 3) their high unpredictability; 4) depletion and opportunities; those who had the courage to buy during the acute phases of the crises were abundantly rewarded after twelve/twenty-four months.

The message is reassuring and rational; it ends announcing that purchase opportunities will soon appear; we are going to seize them gradually.

In the early days of the emergency, financial advisors took action demonstrating a great sense of responsibility. 72% of financial advisors claim to have promptly answered to or contacted their more distressed clients. And this aside of the orders of their employer, who provided them with clear indications in all cases.

For their part, clients had, once again, a chance to appreciate the proactiveness of their financial advisor, who promptly contacted them in more than one case out of two (55%) by phone call (62%), email (45%) or text (27%). Financial advisors reassured their clients and offered to provide explanations of the health emergency (66%) and its impact on investments (83%).

The analysis of the contents of their communication represents a point of interest: every financial advisor claims to have sent reassuring messages in order to avoid panic. Specifically, most of them (81%) reminded their clients that every great crisis has always been a source of new opportunities; 75% of financial advisors acquired and sent their clients the reports received from their employer; 25% of them suggested to invest.

Despite the present emergency, a positive fact stands out: both financial advisors (82%) and their clients (77%) had a chance to use and appreciate remote means of communication as a substitute for the customary face-to-face meetings; and this even before the latest Decree (Source: Finer Finance Mirror 2020; sample: 300 financial advisors and 500 end investors; collection of data: 2-9 March).

It is certain: we are going to get out of the crisis better equipped than before.

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