Advisers may have overestimated the standard of communication they have delivered to their clients since the onset of Covid-19.
Embark’s Investor Confidence Barometer, out today (February 25), detected an 11 per cent discrepancy between the views of advisers and their clients. While 82 per cent of advisers declared overall satisfaction with communication, 71 per cent of clients felt this way.
The biggest satisfaction gap was for online meetings, with which 86 per cent of advisers were satisfied compared to 64 per cent of clients.
However, virtual meetings still fared better than older channels of communication, with text messages securing 61 per cent customer satisfaction and letters only 59 per cent (versus 83 per cent and 78 per cent amongst advisers).
Overall, the switch to online seems to have worked for both sides, according to Embark.
Sara Wilson, head of platform proposition at Embark Group, said: "The move to virtual meetings, particularly in sectors where clients appreciate the value of an ongoing – if not necessarily frequent – two-way dialogue, is an exciting development.
"Up until last year, financial advisory services have been considered an in-person and on-paper industry, but advisers and their clients have very quickly shown this is no longer the case.
"Of interest is the forward-looking view: by and large, both clients and their advisers declare they are more than comfortable to continue having a mostly virtual relationship – not forgetting, of course, that not all clients are the same and that some will always prefer to meet in person.
"This suggests a focus on digital delivery would be a wise investment for advice firms.”
Ad hoc advice
When asked how clients valued different components of adviser services, ad-hoc advice was seen as the most valuable, with 85 per cent being in favour of the option.
Similarly, 84 per cent saw regular nudges and updates by email as valuable and 81 per cent valued financial health-checks when facing major life events.
Conversely, of the adviser service elements considered, face-to-face meetings (78 per cent) and regular reviews (77 per cent) were viewed as valuable by the lowest, albeit still sizeable, proportion of respondents.
Perhaps unsurprisingly, younger cohorts were most in favour of ad-hoc options.
Value of advice
Embark’s Investor Confidence Barometer also indicated the value of advice as it showed a clear hit to the confidence of those who have not sought financial advice.
Prior to the pandemic, 70 per cent of unadvised investors were confident they could deliver their financial plans without an adviser, dropping to 60 per cent since.
One in five unadvised investors is now not confident about delivering their financial plans, up from 8 per cent prior to the pandemic.
Amongst advised investors, more than a quarter (26 per cent) were much more confident that they will achieve their long-term financial objectives than before the Covid-19 pandemic began, with only 8 per cent feeling less confident.
The impact of advice on investor confidence was starkly exposed during the stock market crash between February and April 2020 when 43 per cent of investors without an adviser felt confident compared to 65 per cent with an adviser.
Embark surveyed 750 advised and unadvised consumers with a minimum of £100,000 investible assets, as well as 250 financial advisers.
It said the change in confidence amongst unadvised investors had caused a significant re-evaluation of their use of financial advisers, with one in three having considered seeking advice since the Covid-19 crisis began.
Phil Bungey, chief operating officer at Advance by Embark, said: “It’s clear that a key differential is the role that advisers play in the management of their clients’ investment portfolios and the confidence that this brings.
“The ability of financial advisers to instil that confidence is a valuable attribute, particularly given the uncertain times that we are living through. It is an encouraging sign that many unadvised investors are considering seeking financial advice.”
Paul Cox, managing director at Pure Wealth Management, said he was increasingly being approached by "those who have self-served and fallen foul to premature exits from the markets as they hit new lows."
Scott Gallacher, chartered financial planner at Rowley Turton, said the value of an adviser was in the peace of mind the advice, even during a time of crisis, can offer.
Gallacher said "being forewarned is to be forearmed" and the ability to guide his clients through the pandemic resulted in "only had a handful of calls" from concerned clients.
However, the data revealed a notable difference between the confidence displayed by advised investors and financial advisers themselves, who were much more cautious than their clients about the impact of Covid-19 on their long-term financial prospects.
While 62 per cent of advised consumers said they were confident they will not be significantly financially worse off at the end of the pandemic, advisers thought a mere 39 per cent of clients won’t be worse off.
Confidence impacts investment behaviour
Research by Oxford Risk, a behavioural finance technology provider, found that confidence has a direct impact on investment behaviours and outcomes, with emotionally-led decisions costing investors on average 3 per cent per year, pre-Covid.
However, periods of high stress can cause investor losses to rise to 7 per cent a year from ‘emotionally-guided’ investment decisions.
The research found that investors increasing their cash holdings due to uncertainty was a principal cause of investment ‘own goals’, costing them up to 5 per cent in investment returns a year over the long-term.
Greg Davies, head of behavioural science at Oxford Risk, said: “Times of stress can be very costly for investors. Decision horizons shorten, the emotional component of decisions increases, and we cling to the decisions that feel comfortable in the moment rather than those that are sensible for our long-term needs.
“To overcome this, investors need to maintain a state of calm, and keep their focus on the long-term, which can be difficult to do in the face of rapidly moving events and a barrage of daily news.
“One of the key values of advisers is helping investors navigate the storm and avoid knee-jerk responses, providing both experience and emotional calm. We see from these data how advisers can provide the confidence investors need to stick to their plans.”
Cox said it was “impossible to untether your emotional connection with your own finances.”
“Knee jerk reactions to short, sharp downturns like we saw back in March 2020 were an inevitability for some unadvised investors.” He added.
Tom Higgins is a freelance writer for FTAdviser
