In a matter of a few weeks this past spring, financial advisors were plunged into crisis mode seemingly overnight and out of nowhere.

Every crisis is unique, but several trends emerging from this crisis and recession could forever change the advisory business. These changes offer incredible opportunities for some advisors, but those who can’t or won’t adapt risk being left behind. They need to pay attention to remain relevant and competitive as we emerge from the turmoil.

Cybercrime
One emerging trend involves cybercrime, now a major threat to nearly all firms, many of which have had to cobble together work-from-home cybersecurity policies in just days. Firms now face a greater risk of attack than ever as many of their employees work from insecure home workstations and internet networks.

Financial institutions are always among the most vulnerable to cybercrime. In a recent article in ETF Trends, Stephen McBride asserts, “The coronavirus is laying the groundwork for a massive cyberattack … and the largest cyberattack in history [will happen] within the next six months.”

Since remote working will likely continue for months, and cybercriminals are increasing their frequency of attacks during the pandemic, advisory firms will need to adapt quickly, train their staff and be vigilant in protecting clients’ data.

Streamlined Portfolio Management
Many advisors are still stuck in the old commission-based portfolio management model, doing custom portfolios for every client with an inventory of thousands of positions.

In early 2020, the stock market entered a bear market in just a few weeks—then quickly reversed course. It has risen 40% since the March lows. How can advisors who customize portfolios for every client possibly keep up in a rapidly moving market?

Advisors who have embraced a more limited “menu” of options for clients or who maintain portfolio models were able to take action and rebalance quickly.

Streamlined portfolio management allows advisors to focus on the higher-payoff activities of meeting with clients and making strategic portfolio and financial planning decisions while better keeping up with markets that are becoming increasingly fast-moving and volatile.

Fiduciary Status Required
Even though the Department of Labor’s original fiduciary rule died in an appeals court, it remains to be seen what future fiduciary standards for advisors will look like. I’ve noticed an important trend over the last five years—more consumers are becoming aware of the importance of their advisor’s fiduciary status. Up until a few years ago, they had no clue what the word “fiduciary” meant or why it was important. But increasingly, people who want to work with advisors broach the issue and ask about fiduciary status and what it means for their relationship.

As a result of the increased consumer awareness, many non-fiduciary advisors will struggle to demonstrate to potential clients that they can be trusted to the same extent their fiduciary counterparts can to avoid conflicts of interest and always act in the clients’ best interest.

Face-To-Face Becomes Screen-To-Screen
Clients of all ages are becoming comfortable with Zoom videoconferencing and will likely prefer to continue to meet virtually since the platform offers many conveniences and advantages. As time passes, I believe a return to regular in-person meetings may end up being the exception rather than the rule. This trend has several implications for advisors.

First of all, the advisors who can present well to a camera, using technology proficiently to build rapport with clients and prospects through a screen, will be able to capitalize on the move to virtual to win more business. They’ll also open up opportunities to expand geographically.

Secondly, advisors who relied on face-to-face prospecting will need to get creative about shifting their business development efforts to digital. It’s a real challenge that advisors need to figure out quickly if they still want to grow over the next 12 to 18 months and beyond.

Those who demonstrate leadership and steadiness through consistent virtual communication will deepen the trust and their relationships with clients during this difficult time.

The Disruption Of Accelerated Retirements
A recent study by the National Center for the Middle Market found that Covid-19 will prove catastrophic for 25% of businesses in their survey. In my own conversations with business owner clients (and other colleagues who work with business owners), I’m finding that Covid may end up accelerating retirements and business exits for those who are close to retirement and don’t have the energy to rebuild. Advisors, then, will have the opportunity to help them navigate the path as they leave the workforce.

Depending on how long the recession and market downturn last, it’s possible that many baby boomer advisors will also decide to accelerate their retirement for the same reasons, and that presents an opportunity for younger advisors to buy firms at lower valuations and serve clients while facing less competition.

Rightsizing, Not Scaling
Staffing costs are the largest expense for most advisory firms, and those that have been expanding and adding staff during the bull market of the last 10 years might now be questioning their decisions amid a drop in revenue and continued uncertainty.

Their continued move to paperless offices, however, will save time for client service staff, allowing time and resources to be used more efficiently. Advisors who can adapt and better outsource their non-core functions to tools like Calendly, virtual assistants and gig workers hired on platforms like Upwork and Fiverr will be able to keep head counts and costs lower.

After staffing, a close second for an advisory firm’s expenses is office rent. As more clients adapt to and likely prefer virtual meetings, advisors will undoubtedly start to question why they are paying thousands of dollars on expensive office rent every month (especially if they are in fancy and expensive downtown offices).

In addition, many firms that shifted to virtual operations have found that their staffs were able to work efficiently from home, so they will likely begin to look seriously at downsizing or eliminating their expensive office space when it’s time to renew their leases.

Advisory firms that choose to rightsize will be able to take advantage of the significant cost savings to bring more to their bottom line and improve their value.      

Ashley Micciche is the chief executive officer of True North Retirement Advisors.