Supporting clients during the coronavirus outbreak

On a human level, as the number of cases increase daily, widespread fear has spread to panic buying and increased levels of anxiety. Advisers are neither doctors nor health professionals, but they play a vital role in calming fears over financial circumstances. 

So how is the industry coping so far with what is an unprecedented event?

Advisers spoken to by Financial Adviser say they are receiving calls from clients who are seeking reassurance.

Jane Hodges, director at Money Honey Financial Planning, says: “Clients are asking whether they should be doing anything different with investment strategies — they know this can happen but it still isn’t the same as actually experiencing it. 

“We have seen these crashes before and usually the worst thing is to panic and encash holdings, so everyone needs that reassurance.”

Key Points

• Good financial planning is now coming to fruition
• Capacity for loss is key to one's financial plan
• Initial fee income may suffer

Darren Cooke, chartered financial planner at Red Circle Financial Planning, says the evidence of good financial planning is where advisers have factored in falls in the market.

Mr Cooke adds: “Most people know markets will fall. But for those on the cusp they are a little bit more worried. If you knew money was going to be needed you should also have prepared for that.”

Alistair Cunningham, director at Wingate Financial Planning, says: “Diversification does have its benefits. The fundamental thing is to have the planning right. This is why we are employed in this role.”

Individuals who are years away from retiring may not be panicking about their pension as much as those who are close to retiring and are faced with having to work longer.

Mr Cunningham adds: “If people are on the cusp of retiring and they do not have a clear plan to manage this current downturn, then they have not planned properly. 

“This is the very definition of ‘capacity for loss’ and should form a core part of the advice process irrespective of market conditions. I am, however, sympathetic that turning off the ‘tap’ of income in the current climate can be unnerving but this is the value of decent financial planning.”

Adviser working practices are also changing. More adviser companies have set themselves up to work remotely.

Mr Cunningham says Wingate has a disaster recovery plan that includes staff working from home.

“From literally two weeks ago when we had our phones upgraded by coincidence back to 10 years ago, we have had a big shift from non-localised IT. There has been a big switch to remote working,” he says.

Changing work methods

Ms Hodges notes: “We set up a remote model that uses VC and a client portal and our team all interact with Microsoft teams, so no change for us at all.

“Nothing is really different for us. We just hope the product provider service doesn’t deteriorate too much, but we use online platforms/providers in the main, so again hopefully no change.” 

In the long term, the current disruption and upheaval as a result of coronavirus could change the way advisers work in the long term. But those who do not respond promptly could see their business suffer.

Ms Hodges says: “Hopefully, it will drive a higher demand for electronic communications and the use of digital signatures from product providers and platforms, and an awareness that businesses can survive easily if technology is in place properly.

“We have invested time and effort into being able to work through these difficult times. While others who have not yet made the move to digital, may be experiencing general suffering and wages to pay, then of course that might help them get through it.”

If advisers are not set up to deal with clients digitally, it could impact their ability to meet new clients.

Mr Cooke says: “Bringing new business in might be more tricky. The advice sector is going to have to learn new ways of working.”

Another area where businesses might suffer are where they have not factored in serious market volatility into their financial planning. This could have an impact on ongoing fees.

Mr Cooke notes: “If your initial fee income is suffering because you cannot go and meet new clients, and your ongoing fee suffers because fund values are dropping, then you are really going to struggle.”

It is at this time that advisers will need to be calling on emergency funds and, according to Mr Cooke, larger companies could struggle more compared with smaller businesses, where their margins are typically tighter.

He adds: “You only have to look at profitability stats at larger businesses. At smaller advice firms the profit margin is larger, partly because of the way they structure their business.

“I built my business, knowing what I need to spend to keep it running — building that rainy day contingency into the business as well as my personal finances.”

Wes Ranger, managing director at mortgage company Willow Private Finance, says the business has the technology to enable staff to work from home.

Mr Ranger says: “My team is positive. We are optimists and we will bounce back from this. We have a robust housing market in the UK in terms of the property investment market.

“Our clients are from all over the world. Historically, as a business we have done a lot of telephone work by virtue of where our clients are based.

“In terms of what is going to happen with the housing market, it is unchartered waters. There is uncertainty in the money markets, stock markets have crashed, so how long that will take to bounce back is anyone’s guess.”

Despite this, Mr Ranger is still getting calls from clients, looking to take out large loans.

The majority of the work his team does is specialist in nature. Its clients typically find it difficult to find a solution using a price comparison website.

Contingency planning

Amid the disruption caused by coronavirus, companies still have to fulfil their regulatory obligations. 

In response, the Financial Conduct Authority says it is reviewing its work plans so that it can delay or postpone activity that is not critical to protecting consumers and market integrity in the short term. This is meant to allow companies to focus on supporting their customers during this difficult period.

It still expects all companies to have contingency plans to deal with major events and that the plans have been tested. 

The regulator says: “Alongside the bank we are actively reviewing the contingency plans of a wide range of firms. This includes firms’ assessments of operational risks, the ability of companies to continue to operate effectively and the steps firms are taking to serve and support their customers.

“Companies should take all reasonable steps to meet the regulatory obligations which are in place to protect their consumers and maintain market integrity.”

Where companies may experience difficulties in submitting regulatory data, the FCA adds: “We expect them to maintain appropriate records during this period and submit the data as soon as possible. Firms should not unnecessarily delay these submissions.”

Paul Harding, director at Chevening Financial, says the FCA could go further in alleviating the pressure advisers will be under.

He adds: “We are throwing our resources into contacting our clients to give them reassurance - that is servicing all your annual clients in one fell swoop.

“And then you add the pressures of people working from home and having children at home.”

“When you look at the way everything else is happening it is unprecedented, so the FCA should be pitching in and supporting advisers who are devoting all their time to helping clients while doing all the things they are obliged to do.”

Ima Jackson-Obot is deputy features editor at Financial Adviser and FTAdviser