Health and safety concerns and heightened uncertainty are fuelling demand for personal advice but how big is the opportunity?
COVID-19 has increased everyone’s awareness of the importance of health and safety.
For example, prior to early 2020, people were relatively laissez-faire about hygiene and personal space. Now people vigorously wash their hands 20 times a day, they flinch if someone stands too close to them and at restaurants, menus are becoming rarer.
More than a year on, the threat of COVID-19 remains, meaning improved health and safety practices are pretty much a permanent way of life. Furthermore, people are thinking about other things they can do to better manage their health and protect their loved ones, such as ensuring appropriate life insurances are in place.
Australians are also spending less and saving more with one third of households reporting a drop in income due to COVID-19, according to the Australian Institute of Family Studies1.
COVID-19 may have started as a health crisis but it quickly morphed into a financial and social crisis. At its peak almost one million Australians had lost their jobs.
While Australia’s buoyant job market continues to defy the odds, with job ads in March 2021 jumping 7.4% to hit a 12 year high of 190,5422 and the ABS citing labour shortages in some industries3, 60% of Australians (12 million people) are still concerned about the longer term impact of COVID-19 on their financial wellbeing4, according to the June 2020 report, COVID-19 and Consumers by the Consumer Policy Research Centre.
Ranked in order, top three concerns identified were ability to pay rent / mortgage, bills and insurance.
Cue financial adviser
In this transitional COVID-19 environment, the value and importance of personal financial advice has never been more apparent.
Although the financial services industry has never been that good at identifying key events in a person’s life and reaching out in a timely manner, that seems less relevant right now.
COVID-19 is the accounting equivalent of the end of the financial year. It has eliminated the need for advisers to sharpen their skills so that they are better able to target consumers at opportune times.
COVID-19 has taken the guess work out of client acquisition and engagement.
According to ClearView’s 2021 COVID-19 Impacts Survey, around 22% of advised clients are currently experiencing significant temporary stress and 16% are experiencing significant ongoing stress.
Source: ClearView COVID-19 Impacts Survey conducted in March - April 2021
At the end of January 2021, more than one million employees were still reliant on JobKeeper, based on research by the ATO.
In the past 12 months, discussions about COVID-19 relief measures and whether clients are on track to achieve their retirement goals have dominated client meetings, according to the COVID-19 Impacts Survey.
Other major topics include investment opportunities, property and housing issues, retirement planning and life insurance.
As long as there is complexity and uncertainty in life, professional financial advice will continue to be important.
The traditional catalysts prompting people to seek advice remain: marriage, divorce, buying a property, the birth of a child, new job, gaining an inheritance, retirement, redundancy or the death of a loved one or close friend.
Pandemics just got added to the list.
Against the backdrop of COVID-19, advisers have a unique opportunity to actively engage clients and demonstrate the value of advice by talking about how they have helped people during this uncertain period.
According to the ASX Australian Investor Study 2020, 63% of Australians are open to receiving advice and 17% are more likely to seek advice after COVID-195.
This is on top of the 27% of Australians who engaged the services of an adviser, broker or wealth manager in the past 12 months.
Doing what they do best
According to the ClearView Adviser Pulse Survey, conducted in November 2020, over 57% of financial advisers proactively helped clients who were suffering financial hardship due to COVID-19 access government support.
Beyond the practical financial support, advisers got out of their comfort zone, communicating with clients via Zoom and other digital channels, continuing the relationship even though they couldn’t meet face-to-face.
But this level of client support is neither new nor different. Advisers have a long history of putting their clients first. We have seen this continue through COVID-19.
Over the longer term, this will result in more referrals and opportunities to grow their business.
Interestingly, according to the survey, 65% of advisers believe helping clients to understand and access government benefits, including COVID-19 relief measures, is a key part of their role.
While 65% may not sound high, it is notable considering the industry’s tendency to stick to providing advice on life insurance, superannuation and investments.
It is further evidence of the industry’s focus on client-centricity.
As such, advisers have cemented their position as a trusted adviser.
Even those relatively unaffected by COVID-19 have sought help from their adviser to understand their insurances, navigate volatile market conditions and ensure they remain on track towards their goals and objectives.
According to the 2020 ASX Australian Investor Study, in the period from January 2020 to May 2020, advised investors were particularly active in increasing their holdings, with most crediting their adviser for helping them effectively manage the financial impacts of the pandemic.
Overall, the study found that advised investors were more likely to increase their exposure to growth assets like shares, rather than reduce them.
Almost 70% of advised investors made changes to their portfolio in 2020, with 26% looking for opportunities to take advantage of depressed asset prices to invest their spare cash in the market.
Few advised investors made the mistake of selling in a declining market and, therefore, crystalising losses.
When asked to describe the value of the advice they received in managing the impact of COVID-19, 84% described their adviser as ‘helpful’ including 41% who described them as ‘very helpful’. Disappointingly, 13% said they were yet to hear from their adviser.
Supply and demand phenomenon
The current advice opportunity is significant, as demand for financial advice is building at a time when adviser numbers are falling.
The study found that around 54% of advisers believe that COVID-19 has increased public awareness of the importance of planning for the future and seeking professional financial advice.
Over 30% of advisers believe that COVID-19 has increased public awareness of their mortality and need for life insurance.
A quarter of advisers say clients are more open and receptive to reviewing their life insurance arrangements, due to COVID-19.
According to research by the Australian Institute of Family Studies, among those who had experienced a large drop in income due to COVID-19, 19% sought advice from family and friends and 12% asked for help from a welfare or community group1.
The Consumer Policy Research Centre report: COVID-19 and Consumers, found that mortgage brokers had been the most proactive in terms of offering credit advice to consumers4.
Unless the industry finds a way to meet the increased demand for financial advice by making it more affordable as well as replenishing adviser numbers, there is a risk that unqualified advice will proliferate.
General Manager, Life Insurance
1. Families in Australia Survey: Life During COVID-19 www.aifs.gov.au/publications/financial-wellbeing
2. Australia Job Advertisements | 1999-2021 Data | 2022-2023 Forecast | Calendar (tradingeconomics.com)
3. Job vacancies are surging, and employers say it’s hard to find suitable labour - ABC News
5. The ASX Australian Investor Study 2020: A unique insight into trends shaping investment markets and the impacts of the COVID-19 pandemic - www2.asx.com.au/blog/australian-investor-study
This information is current as at May 2021. This article is intended to provide general information only and has been prepared without taking into account any particular person’s objectives, financial situation or needs (‘circumstances’). Before acting on such information, you should consider its appropriateness, taking into account your circumstances and obtain your own independent financial, legal or tax advice. You should read the relevant Product Disclosure Statement (PDS) before making any decision about a product. While all care has been taken to ensure the information is accurate and reliable, to the maximum extent the law permits, ClearView and its related bodies corporate, or each of their directors, officers, employees, contractors or agents, will not assume liability to any person for any error or omission in this material however caused, nor be responsible for any loss or damage suffered, sustained or incurred by any person who either does, or omits to do, anything in reliance on the information contained herein.