Impact of Coronavirus on Financial Services
In 2020, worry and anxiety became familiar feelings. Especially when it came to the coronavirus pandemic. In a study conducted by the University of Sheffield on the 24th March; the day after the lockdown restrictions were imposed. 36 per cent of respondents reported significant anxiety. Furthermore, in a research study undertaken by AKG in April, 76% of Financial Advisers interviewed, felt the impact of COVID-19 would be the most significant, external issue relating to the ongoing operation of their business.
This uncertainty is also prominent in the Financial Services industry, where questions regarding the economy are featured daily. On 12th August 2020, the ONS confirmed predictions, that GDP for the quarter April to June 2020, shrank by 20.4%. However, this is not all doom and gloom. Within the quarter, there were signs of hope with the monthly analysis showing GDP growth in May by 2.4% and June by 8.7%.
Due to the uncertainty, many IFA firms have consequently experienced increased levels of enquiries and demand for financial advice throughout lockdown. This is supported by the AKG research, with 52% of Financial Advisers believing it will increase demand for financial advice from existing customers. And 48% believing it would increase demand from new customers.
An example of where financial services has seen growth during lockdown is found within Brewin Dolphin’s quarterly trading update. Whereby, it was reported total funds increased by 12.8% in the quarter ending 30th June 2020 and financial planning income grew by 15.3%. This was driven by continued demand and their recent acquisitions.
On another positive note, nearly half (47%) of Financial Advisers feel they improved their relationships with clients during the lockdown. Identified by a research study conducted by CoreData. Despite lockdown restrictions preventing face-to-face meetings, many Financial Advisors quickly adapted to video conferencing to enable communication to be maintained and advice be delivered. Aegon states that 67% of Financial Advisers have increased their use of video conferencing since the coronavirus outbreak. Plus, 73% of Financial Advisers intend to keep using video conferencing with clients into the future. This is the feedback we have received regularly. Many Financial Advisors opting for a blend of face-to-face and video meetings, depending on each client’s individual circumstances such as their health, IT skills, Wi-Fi connectivity, distance, and overall preference.
Unfortunately, another impact of coronavirus, is that 19% of Financial Advisers believe the pandemic will see more Advisers leave the profession compared to the effect of RDR as reported by CoreData. This is a worrying aspect that the whole financial services industry acknowledges; there needs to be greater effort to educate younger generations of the prospects of a career within the industry. As a recruitment agency, we often fill Trainee Adviser roles and help candidates transition their career into financial services.
On the other hand, with more Advisers leaving or retiring from the industry, it will increase available opportunity for other IFA businesses to create growth in their business. As clients will continue to need financial planning advice. With 78% of Financial Advisers believe the IFA Acquisitions market will gather momentum or expand rapidly within the next 2 to 3 years, as stated in the AKG research. If you are thinking of exiting financial services please see our Acquisitions page for more details.
To conclude, many challenges are facing current Financial Advisers, the most contemporary of these concerns being the recent coronavirus pandemic. There is an endless list of direct and indirect consequences, however, not all are negative!