Moment of truth for advice industry amid global pandemic


Kate Anderson

As global markets continue their downward spiral, investors are looking to their financial advisers to help them fortify their portfolios and stay on track, according to leading advice service provider Centrepoint Alliance.

Kate Anderson, Group Executive Advice Services and Solutions at Centrepoint Alliance (pictured), said advisers are currently receiving high volumes of calls from clients seeking support amid the current market uncertainty.

“Clients are wanting to speak to someone about what markets are doing and they need the assurance from their advisers not to panic,” she said.

“Every client is different, so there are no common questions, but we know that advisers are receiving many calls from clients seeking some degree of certainty at this stressful time.”

Important ballast during difficult times

Ms Anderson said it is important for financial advisers to overcommunicate with clients in the current climate to help allay any concerns.

“Advisers have an important role to play during this time to guide clients through important and possibly life-changing decisions about their investments, superannuation and pensions,” she said.

“We have seen markets tumble before but they will bounce back and that is an important message, particularly for those who are still accumulating. For clients who are transitioning to retirement, they are the ones who more than ever will need to speak to a professional about their income requirements.”

Centrepoint Alliance is encouraging all advice businesses, whether large or small, to test remote working to ensure they have the technology and infrastructure in place to continue to support clients as social distancing becomes the norm during the COVID-19 outbreak.

“This is an opportune time to demonstrate to clients the value of advice and confirm your commitment to remain open for business, just in a different way,” she said.

Unchartered waters: Reassessing portfolios and shifting behaviour

Advisers are also playing an important role in helping clients to reassess portfolios and preferences in volatile and rapidly changing market conditions.

Miriam Herold, Head of Research at Centrepoint Alliance said it is vital for advisers to focus on relevant investment time horizons with their clients.

“There is no one-size-fits all approach to dealing with the fear and loss aversion which is likely to be triggered in some clients by recent market turmoil and the developing pandemic,” she said.

“It is at times like these that advisers can really add value by helping a client to understand their individual time horizon and financial requirements.

“The worst thing a client can do after a large equity market fall is to lock in losses by selling their equity exposure, if they don’t require the assets to fund their living expenses.”

Now that the market has officially plunged into bear market territory at the fastest pace in history.  Ms Herold said the importance of constructing well diversified portfolios appropriate for clients’ requirements and preferences is more important than ever.

The low correlation between different asset classes and their performance under different market conditions and economic scenarios is still one of the most effective strategies for managing volatility and smoothing returns for clients.

“The importance of diversification across asset classes cannot be emphasised enough,” Ms Herold said.

“It is extremely difficult to time the market and taking this type of action may cost portfolios dearly over the long run. Instead of attempting to make tactical changes, we recommend including allocations to strategies with a specific focus on downside protection and capital preservation.”

Increased support for advisers

Centrepoint Alliance has implemented a range of measures to support advisers and their clients in the current environment.

In addition to holding weekly briefings for advisers and providing regular updates on industry and market changes, the group is developing templates and tools to support advisers when speaking to their clients, regardless of the technology they are using.

“As an industry, we need to be patient as the government and regulatory bodies work through the current challenges,” Ms Anderson said.

“A good licensee should be keeping advisers up to date with what’s happening and helping advisers to communicate with their clients in the most timely and effective way.”

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