From the second quarter of this year, several FPSB affiliates conducted surveys to understand the impact of the COVID-19 pandemic on CFP professionals and their clients. We look at the results from these surveys, and what the FPSB and its affiliates have been doing to inform the financial planning industry about its evolution during the pandemic and beyond.
Key Survey Findings From the IFPHK, the UK and the US
Gaining new clients
In the IFPHK survey conducted in June 2020, 40% of CFP professionals said there has been an increase of enquiries from prospective clients, almost the same as the 39% who reported a decrease in such enquiries. Though nearly a quarter of them have seen an uptick in new clients since March, a more significant 47% have seen a drop.
Existing clients and their needs
In Hong Kong, the percentage of CFP professionals who have experienced an increase in enquires from existing clients since March stood at 42%, the same as those who have experienced a decrease. In the US, however, the CFP Board found that more than 78% of CFP professionals reported an increase in client enquiries in early April.
The top three client concerns are “Unemployment or reduced income”, “Protectingassets” and “Liquidity”. The pandemic has accelerated the take-up of digital technology.
In Hong Kong, the most common primary recommendations that CFP professionals have made for clients are “Review and update short- and long-term goals” (26%), “Rebalance portfolio” (25%) and “Sit tight. Wait to make any major financial decisions until volatility decreases” (18%).
Meanwhile, according to the CFP professionals, the top three client concerns are said to be “Unemployment or reduced income” (23%), “Protecting assets” (19%) and “Liquidity” (18%).
In the survey of CFP professionals in the UK, around 50% of respondents said their primary advice to clients has been “Sit tight. Wait to make any major financial decisions until volatility decreases.”
Most CFP professionals in the US have been recommending to clients to take a long-term view, and more than 70% of them said clients were worried about managing volatility and protecting assets. This is similar to the UK, where clients have ranked their top three priorities as managing volatility, protecting assets, and saving enough for retirement.
Challenges during the pandemic
Almost one-fifth of CFP professionals in both Hong Kong and the US have reported that maintaining more frequent communications with clients and prospects is a challenge for them. This has been echoed by respondents in the UK, where roughly the same proportion said not meeting their clients in person has been a challenge. Additionally, in Hong Kong, the same fraction of respondents said that planning in anticipation of possible economic recession is another challenge.
Value of having a financial plan
About 45% of Hong Kong CFP professionals agreed that more clients will seek financial planning or professional financial advice in the wake of the pandemic, as opposed to the little over 14% who disagreed.
CFP professionals mostly agreed that clients with a financial plan are more likely to make progress toward their goals: two-thirds of Hong Kong’s CFP professionals were in agreement, while an overwhelming 93% and 94% of their counterparts in the UK and the US, respectively, concurred.
Client Vulnerability
One of the things that CFP professionals all over the world have had to contend with is their clients’ emotions in these trying times. In Hong Kong, more than 78% of CFP professionals rated their clients’ general stress levels to be high, while this figure was 30% in the UK. In the US, a sixth of the CFP professionals surveyed said their main challenge is that clients are “leaning on [them] as a therapist first, planner second.”
In Australia, almost a quarter of the 2,000 consumers surveyed said they have a high level of financial stress, while 30% said their financial position is “okay”. Tellingly, 70% of consumers believed they could have done better to improve their financial position from before the pandemic.
Meanwhile, in Canada, 40% of consumers reported that the pandemic has impacted their financial stress levels, with 10% reporting a significant impact. Slightly over half of the Canadian consumers who have a financial planner said financial stress has not had an impact on them at all.
The extent and depth to which clients have been affected by stress is an issue to which CFP professionals should pay special attention, as it is highly relevant to the issue of client vulnerability – something that we looked at in the last issue of Advisors Today. In fact, this issue is well worth revisiting to ensure that we understand how our clients’ best interests can be served.
Financial Planning Advocacy
The Financial Planning Association of Australia (“FPA”) has been advocating for universal access to financial advice in the new normal. Their research reveals that many consumers have acknowledged that they need to strengthen and protect their finances after the pandemic. Among this group, the top priorities include having affordable advice and support from a financial planner. The FPA wants to make financial planning advice accessible to all consumers instead of only the affluent, a view shared by leaders of consumer advocacy groups and academia.
In June, the FPA launched a campaign to amplify the critical role that financial planners play in this global health crisis. Asking key questions of consumers on how they have weathered the storm with regard to financial management and retirement, the aim of the campaign was to encourage consumers to hire CFP professionals to obtain certain advice in uncertain times.
Over in the US, the CFP Board also seeks to assuage consumer concerns by assuring them that financial planning will help them navigate current and future quagmires. Consumers are reminded that a hallmark of the financial planning profession is that it does not just focus on managing investments, but takes a broader view of CFPs managing their clients’ entire financial situation.
To help bring financial planning to a broader audience in Hong Kong, the IFPHK will explore the possibility of providing incentives to consumers, for example, by way of tax benefits.
Financial Planning and Technology
The pandemic has accelerated the take-up of digital technology. In this regard, the global FPSB community has been busy helping fellow CFP professionals adjust to the changes. On World Financial Planning Day on 7 October 2020, the FPSB hosted a session entitled “The Future of Financial Planning – Adapting to a New Normal”, with a distinguished international panel. Participants spoke about the effects of the pandemic, both as a business disruptor and a catalyst for streamlining operations, incorporating technology, and developing service offerings to meet their clients’ changing needs.
CFP professionals in Australia have recently discussed the considerations for financial planners to go virtual. Those who have done so reported they were surprised that many clients preferred meeting virtually, as it saved them time in terms of travelling. In this health-conscious era, clients were also probably happy to engage in social distancing whenever possible. Those at the webinar added that virtual meetings have the advantage of clients being able to record them for later reference. However, some did mention that certain clients might be put off by having to use new technology.
The Way Forward
There are many challenges to overcome for financial planners as well as their clients. Bleak as the future may seem, there are also plenty of opportunities for financial planners to serve their clients in the best ways possible, by adhering to the tenets of professionalism in financial planning, and making good use of technology, amongst others. Financial planners should also build stronger connections with their international colleagues to share their experience and insight, and to advance the cause of financial planning to consumers around the world.