FEPI Secretary General
Advice in the time of Coronavirus
Our entire continent is only now coming to grips with the first impact of the COVID-19 epidemic in terms of lives and health but also human interaction and economics. In a way, we are shell-shocked, and it is difficult to start thinking beyond the immediate future. However, this is just the type of situation where our clients expect us, as trusted advisors, to look beyond the present and help them make long-term decisions.
We turned to our fellow FECIF colleagues across the continent to understand how the Coronavirus was impacting our industry – we surveyed Germany, France, Italy, Spain, the UK, the Netherlands, Belgium, Luxembourg, Switzerland, Czech Republic. Not surprisingly, an overwhelming majority of the experts we polled observed a major short-term impact of the epidemic on our activity. As with most other economic sectors, our industry is badly hit by the lockdown imposed on Europeans by the COVID-19 pandemic. Despite the development of new technologies, our work relies on personal contact and face-to-face advice, both very hard to maintain in the current context.
Perhaps more surprisingly, our colleagues were much more positive about the medium-term; expecting, by a large majority, activity to pick up quickly after the lock-down release. Is this due to wishful thinking or is it a clear-headed assessment of the situation?
In fact, we have observed across Europe a complex set of factors pulling at our industry from opposite directions. In the short term, people are shocked and isolated, not knowing where to turn. For many people, the recent weeks we spent in lockdown have increased the risk of financial hardship – while others are increasing their savings as they spend less, but also as they worry more about the future. As a result, billions of Euros are poured into accounts, and will need to be invested. This might well explain why an overwhelming majority of our colleagues expect clients to request advice as soon as this is practical.
In the long term, our colleagues generally expect the financial situation to get worse. Beyond the immediate impact of the lockdown and the market crash, many expect an economic recession, and also an increase in health spending, all this causing a further strain on already stretched state budgets.
At a time when acting on pension reforms has never been more urgent, there is no consensus that government will be able to do so. In fact, our experts are remarkably split on this, with comparable proportions expecting their government to take decisive action, to take no conclusive action, or even without an opinion on this. This is quite worrying in itself, and the fragile momentum that had started to build behind pension reform might be disappearing fast, one of the collateral victims of COVID-19.
As a result of all these contradictory tensions, our colleagues are unsure as to what direction household savings will take, with a majority considering that the increased need to save will push up demand, yet about as many worrying that financial difficulties will limit the ability of people to save.
Where is this leaving our clients? It has never been more important to build long-term financial security. Yet is has never been more complex to chart a long-term course. It is difficult for clients to determine what they have to plan for, and in which context their financial future will take place, not least in terms of state pensions and health expenditure.
Faced with a complex and high-stakes question, people need advice, and they prefer to obtain it from trusted advisors they have known for a long time. This was very much in evidence following the financial crisis of 2008-2009, when clients increasingly turned to independent advisors.
In another parallel with the previous crisis, savers and investors will probably want to review how and where they invest. Beyond the immediate winners and losers of the lockdown and the urgent re-arrangement of global supply chains, the development of a long-term perspective in investments, as evidenced by the growing demand for ESG investments from our clients across Europe, is here to stay.
At the same time, advisors will need to adapt and make best use of technology. I do not believe that face-to-face advice will be replaced by robo-advisors any time soon. But as we all turned to remote tools and virtual-conferences during the lockdown, we came to realise that face-to-face can take many different shapes and forms. This will have deep implications for how we manage to build and develop a close intimacy with our clients, as will be needed for us to be in a position to advise them.