Feeling relaxed? Not an easy thing in these times of uncertainty, but according to a survey of CFP™ professionals across three countries, it seems UK clients have remained the calmest.
But it is South Africa where financial planners expect the biggest surge in new clients looking for help.
We know we need to find a new normal way of working and living our lives, but what effect is this uncertainty having on the consumers who are clients of financial planners and those who are seeking advice at the moment? Has comprehensive financial planning helped consumers to reduce their stress and still achieve their objectives?
In April, CFP professional affiliate associations in South Africa, the US and UK surveyed CFP professionals to see how both they and their clients were feeling.
In the UK and South Africa, nearly 20% of the CFP community responded, with around 10% in the US. In total over 2,000 CFP professionals in these three countries responded to the same survey. Client concerns
The CISI, as the marks licensing authority for the CFP™ certification in the UK, conducted the survey of CFP professionals in the UK. An average of around 25% of UK respondents report elevated stress in their clients. This is in stark comparison to the US and South Africa, where around 65% of CFP professionals in both countries say their clients are more stressed.
Why such a marked difference? There is no straight answer. Across the world companies have been forced to cut their dividends. We have also seen capital values reduced. For any clients – perhaps in retirement – relying on dividends to help provide a regular income stream, there will be heightened concerns.
In South Africa, there is a real concern over unemployment and the knock-on effects of reduced overall incomes as many factories have closed because of the pandemic, making hundreds unemployed. In the UK, we have had the benefit of the government furlough scheme, which seems to have helped reduce immediate stress levels. Of course, when that scheme ends in October, we might reasonably expect to see it rise.
The confidence to do nothing is why having a financial plan is so importantThis is supported by clients’ other concerns. In the UK and US, preserving asset values and controlling volatility are both listed in the top three areas of concern for clients, with US clients listing management of liquidity as their third top concern and UK clients most concerned about ‘saving enough for retirement'. In South Africa, concern over asset values was most prevalent, alongside the concerns over unemployment.
The global concerns over asset values are understandable because clients need those assets to meet future objectives. In South Africa, it seems that the clients of some CFP professionals are more dependent on a regular earned income to achieve their long-term objectives. The pandemic is therefore hitting them harder with threats to that income stream; the potential of a global recession looming large on the horizon will not reduce that concern.
What is clear from the surveys is that clients are leaning on their financial planners for emotional support first and foremost, and the number crunching that goes into financial planning second.
Primary advice to clients
What have CFP professionals been advising their clients to do?
They have increased the frequency of their communications with clients, not just by making themselves available but actively seeking to contact their clients and engage with them over their concerns.
Between 30–40% of clients with a financial plan are being told to sit tight and do nothing in all three countries. Is this surprising? Perhaps not. The confidence to do nothing is why having a financial plan is so important.
I used to see some financial plans where ‘capital growth’ was recorded as a client objective. That isn’t a client objective; it’s a means to an end. None of my own clients ever had that as their objective. They wanted to buy a yacht, retire earlier than their parents, move to a new house to somewhere more pleasant for retirement, gift money to grandchildren, help pay for weddings or a deposit for their children’s first property purchase. Minimal changes should be needed to keep the long-term plan on track.
Of course, there was some need to revise short-term objectives, but that occurred in fewer than 20% of instances. Clearly having a financial plan helps reduce the knee-jerk emotional response from clients.Business health
How are financial planning businesses coping and what are they doing?
In all three countries, more than 50% of financial planners believe that consumers will seek professional financial advice in the wake of Covid-19. However, there is much higher confidence in South Africa, at 91%.
The reality of this is still yet to be seen fully in US, UK and South Africa, where CFP professionals have seen a small increase in enquiries from potential clients of 34%, 25% and 36% respectively.
Professional challenges have included supporting staff and their families, the transition to working from home and maintaining a work/life balance with their own families. However, most have also seen it as an opportunity to take a step back and reassess how they work, how they build relationships with clients and how they can ensure that their businesses are more efficient moving forward.
While times have been tough for many consumers, it is a really positive sign of a strong profession that these sorts of reviews are going on behind the scenes. Taking time to review business processes and improve efficiencies will help to make the profession more robust in the future and improve its ability to serve consumers.
What is clear is that many CFP professionals are taking the initiative and driving the profession forward.
Over 90% of all the survey respondents believe that clients with a financial plan are more likely to make progress towards their goals, even during these particularly uncertain times. Helping clients to make those decisions and creating, implementing and reviewing financial plans is at the heart of everything that is happening in financial planning businesses in these three countries. I suspect that the same is true for other CFP professionals across the world.
The original version of this article first appeared in New Model Adviser, 12 August 2020. Edited version republished with permission.