Executive director, EFPA Spain
Challenges for financial advice in the post-Covid recovery
Although still with insufficient strength, we are probably at the beginning of the economic recovery. After more than a year accompanying clients in a journey of unprecedented health and economic crisis, we are heading for a change of cycle in which we will have to incorporate even greater challenges.
So far, we should have avoided abrupt sales and changes in our customers’ investment portfolios and thus taken advantage of the surprisingly positive global market behaviour during the pandemic. Whether we have fully achieved it or not, we now face a long phase of economic recovery that will be accompanied by opportunities, but also by risks derived from the enormous imbalances that the economic collapse has generated. The means that governments have used to soften the crisis, such as public over-indebtedness, almost infinite monetary expansion, and support for sectors that sometimes have little future, which has slipped between direct support to companies and industries that really need them, will be hindrances that could delay the return to stability.
It is a good idea to start preparing our professional response to a very complex situation from here on. We must face, simultaneously, a very demanding situation, and the acceleration of the changes that have long loomed over financial services and that financial advice has to incorporate. We have little time until the vaccination campaign and the relative immunity to Covid-19 place us in greater normality and confront us with decisions related to the economic recovery, with all its risks and opportunities.
The structural framework of the financial advice and planning profession will continue under pressure, but with even greater intensity, from the four great forces that have been conditioning it in recent years. This is the so called “RDSD”: Regulation and the incessant compliance requirements; Digitalisation as the great driving force of the financial services we offer, and the basis of the technology, so decisive in present economic growth; Sustainability, an essential criterion to be incorporated into investment portfolios and a supplementary addition to our advisory tasks; and, finally, the Demand, which obviously is configured as increasingly challenging and depending on the client's profile, as well as highly conditioned by zero or negatives rates. These “RDSD’s” are four vectors that give no respite to the evolution of our financial advisory tasks, already complex, given the prospect of a difficult upcoming way out of the current crisis.
Certainly, Europe has already adopted important measures in the form of economic recovery funds and support from the European Central Bank that allow us to be more optimistic than in previous crises. However, the huge monetary and fiscal expansions will not be gratuitous. The necessary future consolidation of public accounts, the recovery of the ECB's balance sheet, and the possible upswing of inflation and interest rates are going to be a great headache to providing proper advice. It is a high responsibility for the European financial advice profession that accumulates challenges, such as belonging to a continent with insufficient growth, an unsustainable pension system, and poor productivity and competitiveness. Nothing that we did not know and that we cannot confront through regular competence updates and CPD, but still an increasingly demanding task to ensure the best way to meet the financial objectives of our clients.