Portfolios fell by 12.5% between mid-February and mid-June, says survey

A new study of Wealth Managers, Discretionary Fund Managers (DFMs), banks and platform providers has uncovered average portfolio falls of 12.5 per cent between mid-February, as news of the coronavirus outbreak in Wuhan began to affect market sentiment across the rest of the world, and mid-June when wealthtech firm Dunstan Thomas’ conducted the survey. 

UK investors in portfolios managed by the high street banks performed the worst, experiencing an average 13.8 per cent fall in portfolio values in the four month period.

More positively, nearly half (47 per cent) of investment advisory operations estimated that UK GDP would move back into positive territory during Quarter 2 of 2021. Over a third (38 per cent) were even more optimistic, estimating a return to growth in Quarter 1 of 2021, suggesting that the current recession may last as little as one year.

A total of two thirds (69 per cent) of investment advisory businesses recorded furloughing some advisory staff during this peak period in which many offices were closed. Half of both DFM and high street banks recorded furloughing ‘most of their advisory staff’, while only 11 per cent of Wealth Management firms furloughed most of their advisers.

When asked about the areas of focus during this period and in the immediate aftermath of ‘full lockdown’, nearly half (43 per cent) indicated that their top priority working for their clients had been ‘reviewing all shareholdings for debt levels, resilience, and quality and migrating away from particularly vulnerable stocks’.

Nearly four in every 10 advisory firms (38 per cent) instead prioritised ‘ensuring investments are diversified and ideally placed in non-correlated assets.’

The study explored the medium term trends which advisory firms serving High Net Worth Individual (HNWI) clients felt they most needed to plan for within the next three years. The largest group and 41 per cent of all respondents, predicted that the most significant shift they will need to prepare for within the next three years is managing assets in decumulation as many of their clients begin their retirement journeys with Defined Contribution-dominated pension savings (rather than Defined Benefit occupational pensions).

One in every six (17 per cent) advisory firms declared a medium-term focus on intergenerational wealth transfer as Baby Boomers, now aged 56-73, prepare to transfer wealth to their children and grandchildren. Nearly a third (31 per cent) of DFMs considered this their top medium-term priority. The same number predicted that they needed to prioritise preparation for migration to outcomes-based planning.

In terms of how Covid-19 might force terms of business changes, 36 per cent of firms thought that Covid-19 would accelerate the trend away from ad valorem fees towards fixed fee models. Exactly half of DFMs and 43 per cent of asset managers felt this move highly likely in the wake of lockdown.

Remote and virtual customer service has come under the spotlight during lockdown as many firms’ contact centres were struggling to keep up with support demands during April and May in particular. In view of this, it’s no surprise that over half (53 per cent) of wealth managers think that faster adoption of digital-led communications and omni-channel communications integration will be one clear by-product of Covid-19. Two-third (69 per cent) of DFMs believed that ‘better digital engagement with our clients, including strengthening omni-channel communications capability’ will be accelerated because of the coronavirus outbreak.

Linked to this, the survey also explored specific areas of digital communications which is in line for investment over the next 12 months. Co-browsing and on-screen document sharing amongst wealth managers was top of the list: over half (53 per cent) of firms admitted to having this capability but wanting to improve the customer experience during these sessions. A further 22 per cent were looking to offer this capability to clients for the first time. 

Nearly half (43 per cent) of wealth managers were looking to improve their Instant Messaging (IM) functionality while 22 per cent wanted to offer IM capability for the first time.

Nearly as many wealth managers (42 per cent) were looking to improve existing systems for archiving and rapid search and retrieval of video and audio recordings which contained regulated advice, while just over a quarter (26 per cent) of firms were planning to put these data archiving and retrieval systems in for the first time within the next 12 months.

An explosion of new self-directed investment offerings is set to hit the market in the next 12 months as 38 per cent of the investment advisory firms captured by the study were planning to roll out a self-directed investment platform within the next 12 months. 41 per cent of them already had an offering in place.

Of those that already have self-directed offerings, 39 per cent are looking to improve their client or adviser dashboards during the next 12 months to provide a highly configurable and visual overview of key management information, asset valuation changes and much more.

Andrew Martin, Chief Innovation Officer at Dunstan Thomas, says: “It’s becoming clear that Covid-19 is set to accelerate wealth managers’ plans for Digital Transformation. Digital channels which are already in place, are now set for significant improvement and augmentation. And many are putting in platforms and new communication channels for the first time over the next year.

“The focus must remain on Customer Experience so that customers get a consistently positive experience regardless of which channel they use to make contact with their adviser. The other focus is on user experience as portals with key information and indicators are deployed to support both advisers and their clients.”