Findings from a tracking survey on IFA and Investor attitudes at this challenging time exploring the impact that Covid is having on investment behaviour and perceptions.
A few months back I called my friends at Opinium Research to ask if they were exploring the impact that Covid was having on investment behaviour and perceptions. They told me that a tracking study was going live in a few weeks.
I have just been sent the report and although, not surprisingly, some of the findings are predictable, it makes interesting reading.
The study explores both IFA and investor attitudes at this challenging time and found that the biggest issue for IFAS was how to support clients when the default is F2F meetings and reviews. Working remotely has presented problems for 59% of the advisers in the sample.
The demand for advice has fallen for many advisers and this may be a classic ostrich position which I have to confess I have adopted myself to a degree. The focus has been on one to one communication rather than promoting new ideas or services to existing and new clients, and this is where technology has been seen to add the most value by 88% of the respondents.
Surprisingly, less than a third of IFAS are planning to increase investment in technology in spite of the fact that a significant proportion of investors want to keep communicating remotely in future. This reflects the split in the country between those who love home working and those who are desperate to get back to the office and have face to face contact. The desire to use technology is particularly pronounced among younger investors. Email and phone contact score more highly than face to face post Covid (at present…) It’s a bit of a no-brainer that smarter, more technically adept, advisers will be the winners in future. Digital transformation will be even more important.
These finding are true for Asset Managers too. Creative adaptation of existing technology or, in due course, new forms of communication will be required. ‘Death by PowerPoint’ can easily become ‘death by Zoom’. There is some interesting development in the virtual event world, combining gaming technology with video conferencing to create a more interactive and exciting experience for all.
As the report points out, technology has the potential to reshape the way the industry work and could help solve other issue like costs. But (and it’s a big but) technology is nothing without the right content. There will be a need for more targeted and transparent communication. Greater frequency of some content and less of other. More responsiveness to client needs as things change – and boy can they change quickly!
One trend that has been accelerated by Covid is the rise of ESG and the study picks them up.
At embrace we have done a lot of work in this area over recent years and the ‘Covid catalyst’ has been striking. E, S and G are suddenly more important to everyone, and I don’t think this is going away. Not surprisingly, highly rated companies have done better under the stress of Covid, so funds that have this significant additional due diligence are attractive. Environment issues are particularly pronounced according to the findings. With more and more Asset managers offering ESG funds and embedding ESG principals into their normal investment processes, the ones who manage to communicate this coherently and clearly, in a manner that is engaging for both levels of investors, and can demonstrate authenticity, are likely to be the winners.
Guidance from the experts
IFAs also want to see views on the impact of the latest market news and well as guidance from the experts at Asset management companies. In simple terms they want help making sense of a world that has spun out of control.
Active management seems to be of interest too, as volatility is likely in the foreseeable future, with 20% saying they are likely to increase their allocations, and 47% of the younger investors in the sample likely to be more active in rebalancing and diversifying their portfolios. Perhaps the older investors prefer to let sleeping dogs lie? Neil Woodford and now Covid has made IFAs, and I suspect investors, more conscious of the underlying investment in portfolios and this scrutiny may be a good thing (albeit an irritation for asset managers perhaps). The big challenge is cost because investors and advisers are reluctant to pay high fees and charges.
Demand for advice
A theme that I have explored previously is increased demand for advice as the dust settles and the report confirms this.
The sample was focusing on pensions, but I believe all savings, which impact a wider range of segments, will be important as people seek to become more resilient in future. Most of us realise the that the interventions we have seen under Covid and previously in the banking crisis cannot always be relied on in future.
So, when we look back in a few years will Covid have been a game changer for the investment industry? It’s always dangerous to make predictions but I think it is almost certain to accelerate the need for change. More client centred thinking and service, more joined up technology and more responsible advice and investing will be essential. IFAs wanting more support with their communications to clients is hardly new or surprising. In recent months, we have heard a lot about the growing attraction of responsible investing, and this is welcome.
The gatekeepers of the relationship with investors are IFAs and investment platforms such as Hargreaves Lansdown. Asset managers have a largely indirect relationship based on brand perceptions, performance, and promotion. It strikes me that the gatekeepers should be investing more in their understanding of, and relationships with, investors. We are not a homogenous bunch and there is much more to segmentation than simple demographics and asset value.
You don’t have to look far for examples of where gatekeepers have taken a more intelligent and bolder approach. In other industries, companies such as Amazon, Tesco, Sainsbury, and many others have a real grasp of their customers, who they are and what their needs might be. Surely the investment industry can use the catalyst of Covid to make positive progress.