How The Pandemic Has Accelerated The Evolution Of Financial Advice

The Covid-19 pandemic has impacted nearly every facet of our lives, but few more so than our interpersonal relationships. Some relationships that were inessential have faded, while those that are truly important have become more central than ever.

Before the pandemic, it wasn't unusual to hear opinions about how financial professionals would soon become extinct, thanks to the emergence of robo-advice, or the low costs of passive index investing, or both. But the disruption and anxiety driven by the ongoing pandemic have underscored there is no substitute for professional and personalized financial guidance. The connection between advisers and clients was already becoming more collaborative and more personal before the pandemic, and since Covid-19, these trends have only intensified.

Moreover, there is a strong case to be made that technology-enabled resources — from robo-advice, to self-service administrative tools, to on-demand financial reporting — become even more effective when wrapped around a seasoned financial professional.

For the relationship between financial professionals and their clients to thrive in this evolving environment, it is incumbent on the wealth management firms that support these professionals to continuously invest in the tools, platforms and expertise that can advance the following broader goals:

Democratizing financial advice. While various fees and ticket charges have come down across the industry, access to the custom-tailored tools investors need to most effectively pursue their goals has not always followed suit. At the same time, the financial needs of most clients have only grown more complex in recent years, but investment platforms like unified managed accounts (UMAs), which offer sophisticated options for clients to apportion sleeves of assets among various strategies and managers, have largely remained the domain of the high-net-worth segment.

There is no shortage of innovation in the financial advice profession when it comes to offering new account types. We should be just as dedicated, however, in finding new ways to break down barriers, such as high investment minimums, which make some accounts available to only the most well-off client segments. By doing so, we can continue to democratize financial advice and provide financial professionals an even more robust array of customized solutions to meet their clients' needs.

Proactively minimizing potential conflicts of interest. Many retail investors have no idea what Reg BI is and even less what the Department of Labor (DOL) fiduciary rule was. They are aware, however, that advisers are increasingly expected to put their clients' interests ahead of their own. As such, firms across the financial advice profession should proactively seek out opportunities to show investors that they take their best interests seriously by cracking down on incentives that create the potential for conflicts — even when they're not required to.

One key area where wealth management firms can reduce such incentives is adviser-paid ticket charges. Although these charges aren't disclosed to clients, trades in certain types of mutual funds often result in credits being allocated by clearing firms back to the paying adviser. This practice has been used without issue for years by firms and funds across the industry and is entirely in keeping with Reg BI. It does, however, create the potential for conflicts of interest.

Doing away with these charges — even though regulators have not asked wealth management firms to — can only bring advisers' and clients' interests into closer alignment and further strengthen these relationships in the years ahead.

Increasing cybersecurity defenses at every level. As the number of financial professionals working remotely continues to grow and networks become distributed across more devices, cyberthreats will only continue to expand, as well. Retail investors need to know that the crucial financial, health and other types of information they share with their financial professionals will not end up in the hands of cybercriminals, even if this happens inadvertently.

The firms that support financial professionals must take every opportunity to help them to protect sensitive client data. Tools such as secure, cloud-based data backup systems, cutting-edge security auditing and monitoring platforms, and enhanced email with cutting-edge authentication features — all backed up by comprehensive cybersecurity insurance for those instances when breaches do occur — can help remove anxiety and deepen critical bonds of trust.

Due in part to the Covid-19 pandemic, multiple ongoing trends have accelerated and converged to drive continued transformations in the relationship between financial professionals and clients. But these changes suggest potentially greater relevance than ever before — not less — for financial professionals and the crucial role they can play in the lives of their clients.

By positioning themselves to benefit from and drive the trends above, wealth management firms and their financial professionals can take their collaborative relationships of trust with clients to a whole new level.

This article originally appeared on Forbes.

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