The Advisory Career

Pandemic Impacts Even The Most Successful Advisors & Financial Professionals

Leading them to confront these concerns by focusing on strategies to protect their clients, practices and profitability, and position their firms for future growth

Nationwide’s sixth annual Advisor Authority study powered by the Nationwide Retirement Institute explores critical issues confronting advisors, financial professionals and individual investors—and the innovative techniques that they need to succeed in today’s complex market. For more insights download the latest Advisor Authority infographic here.

COLUMBUS, Ohio, March 1, 2021 — As the COVID-19 pandemic persists, the impact has been felt by advisors and financial professionals, even the most successful. In 2020, only 57% of successful advisors and financial professionals expected the profitability of their practice to increase in the next 12 months, compared to 81% in 2019—a profound decline of 24 percentage points. Moreover, these top performers cited the pandemic as the number one concern to the success of their practice over the next 12 months (33%).

To confront these concerns, successful advisors and financial professionals are proactively looking ahead, by focusing on strategies to protect their clients, practices and profitability, and position their firms for future growth. These are among the latest findings revealed by Nationwide’s sixth annual Advisor Authority study, powered by the Nationwide Retirement Institute® and conducted online by The Harris Poll, reflecting the responses of more than 2,500 advisors, financial professionals and individual investors. The study defines successful advisors as those who earn a personal annual income of $500,000 or more from their advisory business, or individually manage a total AUM of $250 million or more.

“Year over year, Advisor Authority has looked at the traits of the most successful advisors and financial professionals to understand what sets them apart from the competition. But what stands out in 2020 is that the pandemic was an outsized challenge for advisors and financial professionals at every level, even the most successful,” said Craig Hawley, Head of Nationwide’s Annuity Distribution. “There is one thing that comes through crystal clear: it is more important than ever to adapt your practice and adopt the CEO mindset of successful advisors and financial professionals in order to manage today’s complex dynamics and position your firm for future profitability.”

Not Immune To The Pandemic’s Impact

Advisors’ practices are not immune to the business impact of COVID-19. Just as expectations for profitability have declined dramatically for the most successful advisors and financial professionals in 2020, only 52% of all other advisors and financial professionals expected the profitability of their practice to increase in the next 12 months, compared to 74% in the 2019 study—a decline of 22 percentage points.

Asked what macro factor most concerned them when thinking about the success of their practice, the most successful cohort and all others agree that the COVID-19 Pandemic (33% and 35%, respectively) outpaced all other factors by a wide margin, with market volatility a very distant second (both 15%).

COVID’s Impact Drives Outlook Down & Concerns Up

Successful advisors and financial professionals also recalibrated their financial outlook downward. Only 37% of successful advisors and financial professionals reported an optimistic financial outlook for 2020, compared to 53% in 2019, plummeting 16 percentage points. Only 39% of all other advisors and financial professionals reported an optimistic financial outlook for 2020 versus 49% in 2019, declining 10 percentage points

Worries about the economy and market also surged. Successful advisors and financial professionals who were concerned about a U.S. economic recession over the next 12 months spiked to 80% in 2020 from 65% in 2019, while all other advisors and financial professionals’ surged to 76% in 2020 from 59% in 2019. Likewise successful advisors and financial professionals concerned about an ongoing bear market over the next 12 months jumped to 76% in 2020 from 67% in 2019, while all others increased to 73% in 2020 from 59% in 2019.

Market volatility was also top of mind in 2020, with more than two-thirds of successful advisors and financial professionals (69%) and all others (67%) anticipating increased fluctuation in market volatility over the next 12 months. Asked what macro factor was most likely to cause market volatility over the next 12 months, the successful cohort and all others said that the COVID-19 Pandemic outpaced all other factors (58% and 63%), followed by presidential elections (both 41%) and U.S. economic performance (38% and 41%).

Protecting Practice & Profitability

Yet, despite rising concerns and declining optimism, Advisor Authority revealed successful advisors and financial professionals are looking ahead to enhance the profitability of their practice.

The COVID-19 pandemic has disrupted even the best laid plans for most of us. But when it comes to their top practice management concerns related to the pandemic, successful advisors and financial professionals remained nimble and primarily focused on solutions. Their top priority, first and foremost, was the health and safety of their employees (31%) as well as their own (31%). This was followed closely by, providing a digital “work from home” strategy for employees (28%), addressing decreased profitability (28%) and providing a digital experience and self-service tools for clients (27%).

When asked what will be most important to enhance profitability over the next 12 months, successful advisors and financial professionals were more likely than the prior year to say that the push for new clients remained their top driver (50% in 2020 vs 41% in 2019). Along the same lines, attracting and retaining clients’ heirs (29%) and targeting high net worth clients (28%), were a distant second and third. Technology was also important for successful advisors and financial professionals to enhance profitability over the next 12 months, including adding new technology (22%) and consolidating technology (17%).

Protecting Clients Against COVID’s Impact

Likewise, technology helped successful advisors and financial professionals to better support clients over the next 12 months, with serving clients remotely rising to number-one (37%), while freeing up time to focus on one-on-one relationships with clients (31%) and providing more personalized holistic planning (30%) were also among the top three. When asked which technology would help them better serve clients over the next 12 months, “e-signature” solutions were most prevalent (29%), with financial planning software (26%) tools for risk management (19%) and CRM (19%) also among their top choices.

There is one thing that comes through crystal clear: it is more important than ever to adapt your practice and adopt the CEO mindset of successful advisors and financial professionals in order to manage today's complex dynamics and position your firm for future profitability...

With expectations for volatility running high and the awareness that COVID-19 had an outsized negative impact on clients’ portfolios, protecting against losses outranked all other client concerns in 2020 for all advisors and financial professionals. In turn, the vast majority of successful advisors and financial professionals (95%), had a strategy to protect their clients’ assets against market risk. More than 8 in 10 (82%) said their clients would feel more secure if a portion of their portfolio was invested in an annuity to protect their portfolios against market risk and more than three-fourths (77%) said they would choose an annuity in the next 12 months to protect against market risk as part of a holistic financial plan.

Likewise, with COVID-19 pandemic disrupting many clients’ retirement plans and having a negative impact on how long they could live off their retirement savings, the vast majority of successful advisors and financial professionals (96%) said they had a strategy to protect their clients’ against outliving their savings. Likewise, nearly 8 in 10 successful advisors and financial professionals (79%) said their clients would likely feel more secure if a portion of their portfolio was invested in an annuity to protect against outliving their savings and more than 8 in 10 (81%) said they would choose an annuity in the next 12 months to protect against outliving savings as part of a holistic financial plan.

Targeting New Clients In The Age Of COVID

To drive greater growth of their business and build a strong base for the future of their practice, successful advisors continued to target a new generation of clients and adopt strategies to retain the heirs of their current clients.

In most recent years, successful advisors and financial professionals have typically focused on Generation X investors as their primary target. While putting more focus on Millennials (40%) and less on Gen Xers (35%) and Boomers (12%) in 2019, priorities shifted back in 2020. Asked which generation of investor would be their primary target over the next 12 months, successful advisors and financial professionals moved away from Millennials (28%) back to Gen Xers (37%) and also increased their focus on Boomers (19%).

Year over year, successful advisors focus on marketing innovation. To extend their reach, build brand equity and capture their share of new clients, successful advisors and financial professionals are more likely than all other advisors and financial professionals to have changed their marketing strategies to attract the next generation (58% vs 52%). Their top strategies included working more with client’s family and children (28%), increased use of mobile technology (26%), increased use of social media (26%) and socially responsible investing (24%).

Finally, the most successful advisors and financial professionals are determined to stay engaged as wealth changes hands, despite studies revealing that the drop-off rates of clients’ heirs can range from 65% to as much as 90%. Year over year, successful advisors and financial professionals are far more likely than all others to have a strategy in place to retain the heirs of their current clients (84% vs. 68%), and this trend remained strong in 2020.

Among those with a strategy in place, working more with clients’ heirs in the planning process (38%) was their top strategy. A proactive approach to retain heirs may also include building a multi-generational team, offering innovative wealth transfer solutions and partnering with experts such as estate attorneys. By connecting across generations, successful advisors and financial professionals can earn heirs’ trust, keep their business in-house and ensure the long-term success of their firm.

 

 

 

About Advisor Authority: Methodology
The sixth annual Advisory Authority Survey was conducted online within the United States by The Harris Poll on behalf of Nationwide from May 27 – June 25, 2020 among 1,768 advisors and financial professionals and 817 investors, ages 18+. Among the 1,768 advisors and financial professionals, there were 758 RIAs, 642 Registered Reps, 500 Wirehouse and 165 other advisors. Among these, 465 were defined as “successful advisors” – those who earn personal annual income of $500,000 or more from their advisory business, or individually manage a total AUM of $250 million or more. The fifth annual Advisory Authority Survey conducted online in 2019 included 1,021 advisors and financial professionals. Respondents for this survey were selected from among those who have agreed to participate in Harris Poll surveys. Because the sample is based on those who were invited to participate in the Harris Poll online research panel, no estimates of theoretical sampling error can be calculated.
About The Harris Poll
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas; building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com.
About Nationwide
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.