The time is now for advisers to demonstrate their value to clients


The market plunge caused by the COVID-19 virus has left an ominous cloud hanging over Wall Street. Many of the most pressing questions — like how long the pandemic will last or what the scope of the economic devastation will be — remain unanswered. 

Advisers are right to worry about losing clients who decide to run for cover instead of weathering further market volatility.  

Many advisers have drawn parallels to the financial crisis in 2009, which left investors and financial professionals shell-shocked and hiding under their office desks, at least, anecdotally. While millions of Americans were impacted, young and inexperienced investors were some of the hardest hit in terms of the indelible mark it made on their money psyches. 

Young investors saddled with college debt were unprepared for the bottom to drop out in 2009. They watched as their investments, along with their home values,plummeted as stalwart financial entities imploded or were gobbled by competitors.

Millennial investors are still squeamish about entering equity markets — and for good reason. Researchers cite significant losses in the financial crisis as a reason this group tends to stay on the sidelines today and forgoes traditional financial advice. Only about 22% of millennial households worked with an adviser at the beginning of 2019, compared to 50% of baby boomer households, according to a Cerulli study.   

The pandemic and the financial crisis, however, are different in an important way, and today’s events can serve as a better lesson to teach the nation’s less experienced investors. But advisers will need to make an effort with this group this time around. 

The coronavirus fallout isn’t likely to create a fundamental mistrust in the financial system as was sparked by the financial crisis. Without having to defend the reputation of their very business, advisers can use the pandemic’s impact as more of a lesson in the value of long-term investing and financial planning. 

Many advisers, who missed an opportunity to help young investors during the last recession, should consider filling the gap with financial guidance and reassurance this time. Sadly, the data being collected today suggests the need could be great.   

Roughly 30% of respondents in a recent survey said they either lost their job or had their hours cut partially since the onset of the coronavirus. About 63% of the 1,000 people surveyed said they were worried that the pandemic would damage their retirement savings.  

As retirement accounts plummeted over the past several weeks, the markets have become an intimidating place for the uninitiated. InvestmentNews retirement reporter Emile Hallez has found the historic COVID-19 drop actually led some millennial investors to seek out financial advice.  

Many of these new recruits are being referred by friends and family, and some are the adult children of current clients. Some are the same group that were once scared away from the markets in the previous downturn. The prospects are generally investors who have not sought out financial advice before — meaning they represent a new chunk of business.  

Now is when advisers need to demonstrate and carefully explain to existing and new clients the value they bring, along with their firms. It will require patiently listening and providing emotional support to clients with a lot of concerns in a frightening time. 

Appreciating that capital is at a premium for millennials who are often saving for a down payment on a first home or starting a family will go a long way to understanding their particular fears for the future. Managing multiple life changes, young investors have a tremendous need for financial planning and can benefit from having the opportunity of longer time horizons. 

Planners should think of their work as a valuable public service right now. For advisers reaching out to help folks in our current climate, don’t forget the clients that have the most to gain.   

Written by Investors Wallets

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