Pertinent Pandemic Insights for Advisors

It’s accurate to say the coronavirus pandemic irreparably altered an array of behaviors, including how people shop, tend to healthcare needs and, yes, invest and perceive financial markets.

Obviously, how clients view markets – and this goes beyond upside and downside expectations – is pertinent to advisors. Indeed, this topic includes elements of behavioral finance and it’s a reminder that advisors are often part psychologist or talk therapist.

The good news for advisors is that the pandemic, damaging as it was in terms of equity performance in early 2020, didn’t alter clients’ interest in participating in the markets. Interestingly, save for meme stock mania, clients aren’t dramatically altering their risk profiles in the post-pandemic investing landscape.

A wide-ranging study conducted by WisdomTree in 2020 – just months of the onset of COVID-19 – examined how investors responded to the pandemic. The results were encouraging and remain pertinent today.

Inside the Study

The WisdomTree study found that the pandemic didn’t cause investors to examine their portfolios more or less frequently. Of note to advisors, the research confirmed that clients were increasingly satisfied with their engagements with advisors following the coronavirus bear market of 2020.

“We also discovered that there were no major shifts in risk tolerance,” notes Ryan Krystopowicz, WisdomTree director of client solutions. “Across the generations, we saw minor shifts here and there, but perhaps surprisingly, more Boomers considered themselves ‘moderately aggressive’ post-volatility, and fewer Gen Xers and Millennials considered themselves to have ‘conservative’ risk tolerances.”

The study also found that the number of market participants that can endure elevated market volatility without rushing to hit the “sell” button rose, indicating more patience and more clients seeing the value of investing for the long-term.

That’s just one example, but it’s indicative of silver linings emerging from the pandemic. Another is clients increasingly valuing advisors relationships and the advice they receive.

“Perhaps unsurprisingly, clients put more emphasis post-volatility on responsiveness—both in making investment changes and in communications. The importance investors put on their advisor’s ability to shift things quickly if needed jumped by nearly 20%. And the importance clients place on advisors being responsive with communications and services also jumped nearly 20% post-volatility,” adds Krystopowicz.

In many cases, COVID-19 didn’t alter what clients want from clients, but the study confirmed certain priorities remain in focus. Those include reduction of financial angst, reaching long-term goals, advisors boosting clients’ financial optimism, dispensing of sound advice, portfolio growth and access to a variety of investment options.

More Important Takeaways

The study contained other important nuggets for advisors, such as the efficacy of model portfolios and the ever important need for good communication.

“Advisors leveraging third-party model portfolios and the vast expertise model portfolio providers bring can help them meet their clients’ functional needs, providing them with the time to deliver the emotional and lifechanging services clients value most,” said Krystopowicz.

As for communication, it’s always important and times of market duress provide advisors with opportunities to add value to client relationships by simply touching base.

“Volatility and the pandemic have only increased this importance. Investors don’t need their financial advisors to know all of the answers, but they need to know that their advisors are there for them, and they need reassurance about their long-term investment strategies,” concludes Krystopowicz.

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