The ramifications of the Covid-19 pandemic will be long-lasting, changing the way we do things, not least how we conduct business and interact with clients. Furthermore, technology will likely play a leading role in this transformation and clients may be more open to different types of service models.
There are still many unknowns at this stage. But one thing is sure: client demand for financial planning and advice is only going to increase. This will put further pressure on the adviser community’s time and resources.
- Economic challenges ahead
The economic landscape is vastly altered as a result of the coronavirus lockdown, and the recession that follows could be the worst in history. Your clients’ financial circumstances may be affected, which could mean different advice needs, requiring a new investment approach. There will also likely be more regulatory scrutiny, as you strive to meet your clients’ demands and navigate the new economic terrain.
- Closer together when apart
The way we interact with clients from here will be different too. In times of uncertainty and change, there is greater need for reassurance and sensitive communication. Clients may want more of your time, even if it isn’t face-to-face, as well as transparent reporting and more regular contact. Are your technology and communication methods fit for the new ‘socially distanced’ normal?
- A different investment focus
Your clients’ investments needs are likely to have a different focus post-Covid. They may need a much broader investment opportunity set to achieve their financial goals, such as multi-asset or enhanced-diversification strategies.
Having lived through one of the biggest socio-economic challenges in our lifetimes, we expect to see investors more focused on sustainable and responsible investing. One silver-lining of the crisis is the clear skies over the most polluted cities on the planet. Climate awareness was already an important investment theme and there will be no going back from here. Clients could increasingly want environmental, social and governance (ESG) considerations embedded in their investments. Or they may want climate change disclosure included in their reporting.
- Regulations rising
On top of this, there is a raft of regulations relating to sustainable investing and ESG risks coming in the first half of 2021. MiFID II regulations will mandate advisers to determine a client's ESG preferences as part of their fact find, when recommending investments. The EU Action Plan for Financing Sustainable Growth, meanwhile, will focus on climate benchmarks and ESG disclosures.
That’s more scrutiny and more business risk around an evolving theme on which you may need support and training. And can you be sure the investments you recommend are fully transparent on ESG criteria?
Outsource for success
The adviser community has a strong track record of adapting to the forces of change – RDR, pensions freedoms, MiFid II, to name a few. And it will do so again as we emerge from the pandemic. Partnering with a discretionary fund manager (DFM) could ease the transition to the ‘new normal’.
Outsourcing your day-to-day investment management to a DFM brings a number of benefits.
- More time to spend with clients – less investment research, admin, due diligence and fund governance on a daily basis
- Reduced costs – removes research costs, portfolio management and rebalancing procedures, from your business
- De-risk your business – the DFM is responsible for constructing portfolios, selecting investments and keeping them aligned to risk levels, thereby eliminating specific investments risks and governance duties
- You keep control of the client relationship
- Access to additional investment expertise and solutions – e.g. multi-asset, enhanced diversification, values-based and responsible investing strategies
- Potential to generate better performance from diversified investment options
But not all DFMs are equal. At Aberdeen Standard Capital, we have a range of investment solutions that you can apply across your client bank and that cater for different risk profiles and objectives. We can also draw on the extensive investment expertise and global research of Aberdeen Standard Investments in our own range of investment solutions. This means we can offer you an institutional level of investment expertise and research capabilities, as well as broader and more diversified investment opportunities than many of our DFM competitors.
Being part of such a large organisation also brings economies of scale. We can pass on these benefits to you and your clients through competitively priced traditional DFM and manged portfolio services.
And when it comes to responsible investing, we fully embed ESG consideration in our investment process. What’s more, we have award-winning* credentials for sustainable investing and offer specialist ethical, impact investing, climate aware and socially responsible funds. Our managed portfolios service will also soon include a sustainable investment option.
Find out more about the Aberdeen Standard Capital Investment Service (MPS) offering your clients a range of portfolio strategies with a choice of management styles and risk levels.
*PAM Awards 2019 winner – Sustainable investment solution
* Investment Week Sustainable & ESG Investment Awards 2019 winner – Best Wealth Manager / DFM Group