Most financial advisors are anticipating a revenue drop and hit to their firm’s overall profitability during the next six months due to the coronavirus crisis, according to a new study from Practical Perspectives, an independent consulting and research firm.
According to the report, 76% of respondents anticipate a negative impact on revenue and 65% envision a hit to their profitability.
The report also had bad news for smaller wealth management firms: “How a projected decline in the financial strength of advisor practices plays out over time may accelerate consolidation and the exodus of smaller advisors from the industry.”
While things are certainly not rosy across the board, there are some bright spots to be found within the report. Most RIAs and broker-dealers say the pandemic has not seriously affected their ability to serve clients, and 45 percent of advisors expect growth in new clients. Furthermore, 91 percent of advisors expect either a positive impact or no impact in their ability to retain existing clients.
Other stats:
• 64% of advisors said they’ve experienced little, if any, disruption to their client-service capabilities during the crisis.
• 84% are either “extremely” or “very” confident in meeting client needs.
• 78% have proactively reached out to most—if not all—of their clients.
• 83% have made no more than minor changes to how they manage portfolios, and this includes one in three advisors who have not made any changes.
When it comes to portfolio changes, 52 percent of those have been raising cash allocations. 38 percent has been boosting exposure to “less aggressive” equities, and 33 percent has been decreased equity exposure.
Still, the immediate future looks grim as 45 percent of advisors who participated in the study anticipate the equity markets will have a negative year to date, while only 10 percent expected it to be positive.
