This archive report was first published on 4 August 2020.
Adapting to Crisis in Wealth Management ¶
As the Covid-19 pandemic continues to impact the global economy, wealth managers are facing unprecedented challenges. The crisis has marked the end of an extended bull run since the 2008/9 recession, causing an economic downturn of unprecedented scale worldwide.
With governments imposing measures to contain the spread of the virus, the economy has experienced record volatility and plummeting prices across asset classes in wealth management. The financial markets have seen huge capital outflows and panic sell-offs, with investors seeking safety and stability in perceived stable assets and precious metals.
Against this backdrop, wealth managers must seek new strategies and measures to adapt to these emerging challenges and position themselves at a vantage point to remain competitive in the long run.
Automation and Digitisation ¶
Automation is shaping the future of wealth management, with a surge in robo-advisory sign-ups in the US during the first quarter of 2020. Investors continue to prefer robo-advisers as they make investment decisions based on real-time statistics and are unfazed by emotions even in tumultuous times.
Further, tactical re-evaluations by digital portfolio managers can mitigate the effects of volatility on investments. Adoption of digital channels across the wealth management value chain can support business continuity amid a sustained crisis.
Integrating clients into digital platforms ensures real-time tracking and access to their portfolios through omnichannel options. Digitisation also allows individuals to assume multiple workflow roles, reducing office space demands and improving operational efficiencies.
Effective Communication ¶
Timely communication is a rewarding pursuit in times of uncertainty. Wealth managers have a responsibility to communicate regularly with their clientele, advising them to remain calm and committed to the long-term investment goal.
Financial advisors should reach out to investors through phone calls, emails, and virtual meetings to build goodwill and inspire confidence in their clientele. Continued engagement with the client is vital to sustain investor confidence.
Addressing Market Turbulence ¶
Both public and private markets continue experiencing downturns due to the pandemic. Public markets, characterised by high levels of liquidity, exhibited sudden loss of liquidity and high volatility.
Private markets, such as private equity and asset-class real estate investments, have not been spared either. Reduced investor sentiments during this period have cut revenues, leverage, and valuations of both equity and debt investments.
Wealth managers should build contingency plans, liquidity management procedures, and roll out value creation strategies to minimise cash-burn as the enduring effects of the bear market last.
