Investment advisors are seeing a sharp increase in the number of clients since the pandemic. With these new clients comes a new way of looking at the role of the financial advisor.
The COVID-19 pandemic caused many people to re-evaluate what was important in their lives. In some cases, they realized they had neglected their financial well-being for some time. As a result, they began to seek advice from financial advisors, but not just for advice on how to invest their money, but on how to manage all of their finances including buying a house, saving for college, and planning their retirement.
“Life changed really significantly through the pandemic,” said Tim Gerend, executive vice president and chief distribution officer at Milwaukee-based Northwestern Mutual. “It led to a real moment of clarity for people on what is really important to them.”
Opportunity In Crisis
Northwestern Mutual recently published its 2022 Planning and Progress Study, which illustrated this point. It found that 18% of more than 2,000 Americans surveyed did not have a financial advisor prior to the pandemic, but began seeing one afterward. Other studies, including the Prudential Pulse survey released this summer, found similar results.
“The pandemic has brought to life what is really important in people’s lives,” said Caroline Feeney, chief executive officer of US. Investment and Retirement for Newark, N.J.-based Prudential Financial.
The impact is being felt on the ground as advisory firms have seen growth in their businesses since the pandemic. Sara Stollberger, director of financial planning at New York-based Bridgewater Advisors, said her firm has seen a “slight uptick” in the number of clients, although she could not provide specific numbers.
“There was this prolonged period of reflection that people went into and I do think it really made them think hard about their current life status and rethinking their goals and what’s important to them too,” she said.
The need to take stock in one’s financial future and guard against financial mishaps has only intensified with recent record-high inflation and turbulence in the markets. These conditions have struck at the confidence of many investors, according to the Prudential study.
It found that about three quarters of those surveyed were concerned about a recession or that economic struggles will continue for the next two years. In addition, 50% worried about money every day and around 70% said they were concerned about their long-term financial future.
“With all of their fears around what’s around the corner or what could be an even more turbulent economic environment on the horizon, we see that investors are taking actions to try to secure their financial future,” Feeney said.
Offer More
Those fears have led to clients seeking more out of their advisors than they have in the past and caused advisors to have to pivot in response. The industry is shifting away from simple portfolio management to addressing a variety of financial needs of clients.
“Financial planning is not just about having a great retirement,” Gerend said. “It’s about having a great financial life right now.”