Financial planning evolves beyond investments in a COVID-19 world

The financial advisory industry is learning on the fly and in many cases adapting well to the COVID-19 world where working remotely means taking on new challenges and relying more heavily on technology to communicate with clients and colleagues.

With that in mind, an InvestmentNews webcast on Tuesday tapped into the experiences of financial planning professionals to take a closer look at the techniques, communication and delivery needed to optimize advisory practices during the global pandemic.

The silver lining that many financial firms are quickly realizing is that working from home might be an underrated and overlooked opportunity for basic business management.

“None of us could have pictured this, but I’m amazed at how effectively our people are working and how seamlessly they’re transferring calls, doing trades, and doing reviews,” said Gerard Klingman, founder and president of Klingman &Associates.

“I think a lot of us will think about how we work going forward because we’ve been so productive under these circumstances,” he added.

David Armstrong, president and co-founder Monument Wealth Management, has also been pleasantly surprised with the transition to remote work.

“I’ve been joking that it will be difficult to convince people to come back to the office because it’s going so well,” he said. “It has driven serious questions about what our future office space looks like. I’m thinking when the lease comes due, we could cut office space in half.”

After just a few weeks of having his company work remotely, Armstrong is already envisioning a wealth management firm where employees have lockers instead of workspaces.

“If you need privacy and personal space, just stay at your kitchen table,” he said. “Of course, I would be putting that office space expense back on the employee to expand their home office space.”

Klingman and Armstrong were two of the four panelists discussing what has become the new normal for how financial professionals continue operating by placing a greater focus on the general well-being of clients and employees, and less on the state of the financial markets.

Mike McDaniel, co-founder and chief investment officer of Riskalyze, said prior to the COVID-19 outbreak his company had already drafted a questionnaire to see how employees felt about working remotely.

“We’re now holding off on sending out that questionnaire until everyone has done it for a few weeks,” he said. “I think a lot of folks like the idea of working from home.”

But even as advisers and others who can are adjusting to working remotely, there are many nuances that should be considered when relying on technology for professional and personal interactions.

Behavioral finance

Klingman said it’s important to keep in mind that clients are not just adapting to communicating via video, they are also dealing emotionally with an unprecedented pandemic that has devastated the global financial markets.

“Don’t presume the clients want to talk about their portfolios or the markets,” he said. “It ranges from somebody terrified about their health or the health of family member, to the other extreme of people thinking this is a great time to buy long-term risk assets, but don’t make assumptions about what they want to talk about.”

That point was spot on, according to Sarah Newcomb, director of behavioral science at Morningstar.

“I agree, advisers should listen first,” she said. “Advisers are great listeners and one thing they should listen for is signs of rumination, which can happen whether someone is wealthy or not.”

Rumination is similar to anxiety and depression and involves dwelling on a thought or problem that doesn’t have a clear resolution.

“When there are so many unknowns like now, we can’t solve the problem and our brains go to overdrive with repetitive thoughts of what-ifs,” Newcomb said. “The reason rumination is so bad and so dangerous is it shortens your time period. Right now, people have very short-term thinking because they can’t predict next week, never mind 10 years from now.”

Newcomb said advisers should listen for signs of fear and anxiety and then encourage the client to talk about someone who has been an inspiration to them in the past.

“Don’t talk about numbers,” she added. “Just thinking about their social support network allows people to think longer term and make better decisions. Ask them about their emotional support network.”

In terms of communicating over video or phone when face-to-face meetings are not possible, Newcomb said it’s important to be as engaged as possible, which means looking into the camera to simulate eye contact and to offer constant acknowledgement of listening when talking on the phone.

“The other part of delivery is tone and leadership is important even if all you do is stay poised,” she added. “There are so many shouting voices right now that people appreciate a calm presence. You don’t have to put an overly positive spin on things, but just be calm and poised.”

In addition to enhancing communication with clients, Newcomb said financial professionals should pay attention to their own well being as the crisis unfolds.

“The first thing we have to recognize is everyone has had their life altered,” she said. “We’re all so tired right now because our brains have to work harder because we’re not in our normal routine. Give yourself permission to rest more and not operate at 100% all the time. We are creating new behaviors and everyday we’re trying to form new habits and behaviors. This is a great opportunity to break bad habits and start new habits in any area of your life.”