In a few short months, the global pandemic has upended the way Americans live their lives — and wearing masks is only half of it. The pandemic also has had financial and emotional consequences. It’s led many to look more closely at their financial situation and prompted some to revisit their financial plans.
This increased introspection has created new opportunities for the financial services industry to re-engage with investors, but it has also created new challenges as financial advisors adjust to the new environment they must work in. We spoke with Aditi Javeri Gokhale, chief commercial officer and president of investment products and services at Northwestern Mutual, about how the pandemic has impacted the financial services industry and what advisors can do to thrive in this new norm. Continue reading for excerpts from that interview.
How has the pandemic impacted the traditional wealth management dynamic?
The pandemic had an immediate impact on our daily lives and Americans are being reminded now, more than ever, of the importance of having a financial plan. But still, not enough people are taking action. Our 2020 Planning and Progress Study found that only around a fifth of Americans say they have revisited their financial plans and made significant adjustments in response to the pandemic and its economic impact. Given the widespread volatility our economy is experiencing, we think that more people should be — at a minimum — revisiting plans and understanding where they stand. A well-designed plan should stand the test of time, even though volatility. A positive shift has been a renewed interest in financial planning from younger generations. In fact, 22% of millennials (as well as 22% of) Gen Z consumers who didn’t have an advisor are now looking to work with one.
There is also a gender aspect to this. Our research found that women have felt the emotional impact of (the pandemic) more heavily than men, and that has implications for wealth management. In addition to juggling priorities like caring for family members, managing schooling at home and having a career, women are increasingly looking ahead financially. On average, their interest in speaking with a financial advisor remains greater than men and spiked as the pandemic grew in severity. Female investors and savers are asking more questions about how to best plan for retirement, how to minimize risk and overall guidance on investing in a volatile economy.
While there are so many challenges caused by the current environment, one positive aspect we’re seeing is that Americans are saving more and thinking critically about how they should be spending. During the pandemic, we’ve seen increased net cash flow in our retail investment products and services business, including a surge in new clients, which demonstrates that clients are thinking about their financial plan and planning for the long term.
What do these changes mean for financial services companies? How should they service this shifting dynamic?
The current environment truly underscores the importance of working with a financial advisor who understands your unique situation and financial goals. There is no substitute for the empathy, guidance and perspective of an advisor — and that is especially true right now during these challenging times. And yet, the pandemic has forced advisory firms to lean in on and supercharge their digital capabilities to continue business operations. Firms that weren’t already implementing and prioritizing their digital capabilities are rapidly falling behind. To best serve customers with this shifting dynamic and be successful in the future, the industry will need to invest in both people and tech, without either of them coming at the expense of the other.
Prior to the pandemic, and to enhance the guidance of an in-person financial advisor, we have been focused on enabling digital and virtual experiences that give consumers access to what they need, at any time from anywhere. For example, just before the pandemic, we introduced an online tool that provides a better way to create, present and discuss a customized financial plan that leverages data-driven insights. These tools are critical as our advisors have shifted most of their business to virtual client meetings. Consumers demand an always-on experience, and this has been even more critical for our business because of the pandemic.
What impact do you foresee this having on the advisory industry in 2020 and beyond?
This is a challenging time for everyone, and as the pandemic persists, there are still many unknowns in our “new normal.” In the advisory industry, in-person work environments build connections with teams and clients. But with challenges come opportunity.
We’re hearing from our advisors that the work-from-home environment and virtual meetings have made it easier to connect with clients more frequently. It’s also made it easier to incorporate other important people into the discussion, such as their spouse, family members, attorney, accountant, etc. The virtual work environment has also opened up more opportunities to reach clients and prospective clients across geographic boundaries.
Do you have any other predictions for the second half of the year and 2021?
Advisor-client relationships are critical right now and will continue to set firms apart. I think people will increasingly see the need to have a financial advisor in this economic environment.
Beyond just having an advisor, I think there will be an increased emphasis on how advisors serve clients, and how a financial plan must help someone both protect and prosper through uncertain times.
Demonstrating strength and stability is critical. Across the financial services industry, I think we will increasingly see the strength of companies who built financial strength in advance of this current situation.
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Q&A: Northwestern Mutual on Pandemic’s Impact for Financial Advisors originally appeared on usnews.com