COVID-19 pandemic has left clients doubting their financial wellness, advisors say

A year of economic turmoil sparked by the pandemic has led many customers to think deeper about their finances. Many counselors report that clients have low confidence in their own financial wellbeing.

The COVID-19 pandemic has given customers a greater understanding of their financial vulnerabilities and made them think more strategically about retirement and other long-term goals, according to Financial Planning’s latest Financial Wellness Report.

“People are much more open to drawing up a comprehensive financial plan,” says one advisor in the quarterly survey.

But that wasn’t a universal feeling. Other consultants described the frustration of working with clients who reacted emotionally to COVID-related headlines over the past year. Some advisors even saw clients turn away from their focused financial plans during the pandemic.

“The past year has resulted in too many people stopping long-term thinking,” says one consultant.

Advisors differently described clients as frightened by market volatility or concerned about immediate financial needs, factors that caused some clients to withdraw from the markets altogether.

“The biggest challenge was keeping them invested during the pandemic,” says one advisor.

Overall, however, the consultants were fairly positive about the financial well-being of their clients – even if the clients themselves didn’t feel that way.

For example, half of the consultants surveyed said that the percentage of their clients on the way to retirement had increased since March 2020, while just under 14% said their clients’ willingness to retire had decreased. Only one consultant says that customers’ willingness to retire has “dropped significantly” since last March.

“For the majority of our customers, their financial well-being has improved since the pandemic,” says one advisor.

The pandemic experience has worked both ways when it comes to customer retirement planning. Significant minorities of consultants surveyed indicate that at least half of their clients would like to retire either earlier (20.5%) or later (24.8%) than they expected at the start of the pandemic.

Suggesting an explanation for this apparent bifurcation, a consultant notes that clients responded to the extreme circumstances of the pandemic by doubling their established financial habits.

“The pandemic has exacerbated customer behavior,” says this advisor. “For poor savers, [with] With the excess of cash savings (from incentives or savings they couldn’t spend because they couldn’t run out, etc.) they find new ways to spend the money instead of using it for their goals. For the good savers, they have taken the opportunity to aggressively pay off debts, including the mortgage. “

The survey found an obvious discrepancy between clients ‘assessments of their own financial health based on their advisors’ assessments.

In short, consultants say customers are too tough on themselves.

In a survey of their own assessments, 79.7% of advisors said that their clients were willing, very or very willing to do something to improve their financial wellbeing.

“The pandemic has made my clients more focused on the importance of financial preparation and more open to advice on how to better prepare,” says one advisor.

When asked about their clients’ thoughts on their own financial wellbeing, 84% of advisors say that between 0% and 25% of their clients are “extremely confident”. More than 92% of the consultants surveyed stated that no more than 50% of their customers are “somewhat confident”.

“We teach all of our clients financial wellness,” says one consultant. “It is up to them to make this happen, but we touch the grassroots and encourage every opportunity we get.”

The advisors also considered how to adapt their own practices to the realities of the pandemic. 65 percent of those surveyed stated that they had started holding virtual customer meetings in the past year. Along with the 31 percent who said they have already conducted remote meetings, this suggests that this has become a near-universal practice.

The numbers were almost as high when consultants were asked if they would like to work from home. Fifty-three percent of respondents said they would work from home during the pandemic, while 36 percent said they had already done so.

A significant majority of respondents expect to continue working from home (72%) and holding virtual customer meetings (85%) after the end of the pandemic.

The consultants were also asked to create a long list of financial wellness priorities that they would like to focus on with their clients after the pandemic. Most counselors state that their main priorities would be age and estate planning. 50% say they focus on helping clients build cash reserves, while 43% try to help clients cut interest rates on mortgages and other loans.

The consultants surveyed in the latest Financial Wellness Report repeatedly stress the importance of communication and education as keys to improving clients’ financial wellbeing.

“At this point, being in contact with customers is of the utmost importance,” says one consultant.

Another puts the process of customer education in the context of the consultants’ greater duties of loyalty and care.

“Our role as trustees should not only include managing their assets,” says the advisor, “but helping them expand their knowledge so that we can work together towards the same goal.”

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