This article appears in the Mid-October issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.
After facing unique economic challenges over the past few years, financial advisors of all types and levels of experience have identified a need to calm and educate certain clients.
As part of the 2023 Report Card series, advisors across the brokerage, dealer and retail bank channels were asked to rate how difficult it was to advise clients amid conditions such as high inflation and rising interest rates. The 1,300-plus advisors who responded assigned average difficulty of just 3.5 out of 10.
Advisors in the first two channels had more industry experience. On average, brokerage advisors had 23.3 years’ experience and were aged 51.0; dealer advisors had 22.8 years’ experience and were aged 51.6.
The average bank advisor, however, had been in the industry for 15.9 years and was 41.1 years old.
Advisors polled in the brokerage space, who assigned a 3.3 for difficulty, were generally confident in their investment expertise and the “people management” skills they had gained through decades of experience.
“I’m not challenged [when] assisting clients because I understand their goals and communicate with them, giving them what I believe are the best resources,” said one brokerage advisor in Ontario. This advisor advocated for reaching out to clients proactively when issues such as surging inflation prompt “some belt tightening.”
“Because we’ve developed a lot of financial plans, we’ve factored worst-case situations in,” said a brokerage advisor in the Prairies. Encouraging clients to pay down debt and keep cash on hand means advisor and client are simply “working through cycles” and riding market waves, they added.
Still, some brokerage advisors said finding time to connect with worried clients can be challenging. When managing client emotions becomes necessary, “the difficulty of the job grows exponentially. [It’s been] a lot more work,” said a brokerage advisor in British Columbia.
Dealer advisors, who assigned a 3.4 on average, had similar experiences.
“I think [there’s] just more coaching around what’s happened [with markets] and negative numbers on clients’ statements,” said one dealer advisor in Ontario.
Many other dealer advisors said none of their clients were particularly concerned about medium-term economic trends, noting that transparent communication with clients over the years had benefited those relationships.
Other dealer advisors conceded that talking with clients who had become emotional over portfolio volatility could be tough.
“Different scenarios bring up different emotions,” said another dealer advisor in Ontario, and clients’ anxiety increases when “costs go up and portfolios go down.” The same advisor added that investment fads, such as cryptocurrency, also can spark “mildly challenging” questions from clients who otherwise would “want to stick with the plan and keep it simple.”
Having wealthier clients seemingly made an advisor’s life easier. “I have a lot of high-net-worth clients and the fluctuation in the market doesn’t affect them that much. They still go on their vacations. They haven’t changed their lifestyle that much,” said a third dealer advisor in Ontario.
Advisors and planners with retail bank branches had the most difficulty serving clients amid economic challenges. Bank advisors assigned a 4.2, saying they faced hurdles in educating clients and curbing their stress.
“We have a lot of education to do,” said a retail bank advisor in Quebec. “Now, we have to dissect some issues in more depth. Customers are worried.”
“[We’re] navigating client emotions,” and helping people focus, said a retail bank advisor in B.C. “[That’s] never easy when books are shrinking.” (The average retail bank advisors’ assets under management was reported as $134.9 million as of Dec. 31, 2022, down from $152.3 million a year prior; read more about the average industry advisor.)
As mentioned, advisors in the retail bank space were younger and had shorter industry tenures, on average, than their brokerage and dealer counterparts.
Some bank advisors noted that they were considerably younger than many of their clients. The recent bouts of volatility and inflation “brought back old memories” for clients who had experienced several wars and economic crises, said a retail bank advisor in Ontario.
“It’s something that most of us have not really experienced,” that advisor added. “Having [tough] conversations when people are losing money, and trying to explain what’s different now, is hard.”
The difficulty of addressing portfolio changes and economic trends can depend on your “array of clients,” said a retail bank advisor in Ontario, who noted the job can be “a breeze” for advisors whose clients are not stressed.
But having adequate resources is key, said one retail bank advisor in Alberta: “When there’s major news, you have to communicate with all clients [and] reach them in a timely manner. It would be nice to have [a good] digital solution for client communication — maybe webinars or emails. As an advisor, as one person, it’s tough to reach all clients [plus] do your day-to-day job.”