Kudos to financial advisers—and their clients

By David Wismer

I wrote an article before Thanksgiving that, in part, praised the efforts of frontline medical workers, first responders, teachers, and others for their efforts during the 2020 pandemic. We all remain thankful for their outstanding efforts this year.

Additionally, our thoughts go out to all who have had medical, employment, or financial issues during this crisis, especially as we come up to the holiday season.

A challenging 2020

Today, however, I want to focus on two wholly different groups that I think deserve some recognition in 2020: financial advisers and their clients.

As editor of Proactive Advisor Magazine, I have been privileged to interview financial advisers all over the United States, from diverse backgrounds, with practices of all shapes and sizes, and affiliations with many different broker-dealers. They have shared in-depth information on their firms’ missions, client-service practices, investment philosophy, marketing, and other areas.

While it has been difficult for everyone to conduct “business as usual” this year, the conversations I have had with many advisers have revealed an uncommon devotion to the needs of their clients. While that is generally true no matter what the year, it has been especially noteworthy in 2020.

Advisers have had to overcome several unusual factors in 2020, some readily apparent and some not so obvious:

-U.S. financial markets that essentially had one of the fastest bear market declines in history, followed by one of the most impressive recoveries on record (in the face of multiple headwinds).

-Going hand in hand with the markets, emotions for many market participants and investors have swung from “extreme fear” to “extreme greed” in unprecedented fashion. This year has been like a “real-time laboratory” for all sorts of behavioral finance issues.

CNN’s widely followed Fear & Greed Index tracks seven indicators of investor sentiment, which, unlike many other sentiment studies, incorporates several component factors based on quantitative market inputs. As shown in the following illustration, 2020 has seen five major swings in this measure (though 2018 and 2019 were not exactly smooth sailing either).

-In the middle of market, economic, and health-care challenges, advisers have had to swiftly adapt to largely using remote communications with clients. This has been true for financial firms of all kinds, including Flexible Plan Investments, and the transition has generally been impressive. But I think this successful adaptation has been especially critical for financial advisers, who are tasked with the very personal and customized client discovery process, in which they learn about their clients’ specific financial situations, financial objectives, risk profiles, and future aspirations and dreams. This process is particularly crucial for new clients.

Some advisers were well-prepared for the transition, having worked remotely for years with out-of-state and overseas clients. Others have said the transition required fairly intensive staff training, clear and timely communications with clients, and new technology investments.

-Advisers have also faced the practical, day-to-day challenges of working and living during this pandemic. Financial advisers have experienced what we all have: concern for elderly relatives, children at home attending school remotely, disrupted plans across many fronts, and (unfortunately for some) health issues—COVID-related or otherwise.

-While changing their practice model, many financial advisers have also seen increased demand from existing and new clients for in-depth financial planning—especially concerning areas such as estate planning, life insurance, disability, long-term-care products, and risk management in general. By all reports, advisers have stepped up to the challenge. This has not always been a pleasant or routine task, with some clients facing job loss, severe budgetary problems, the death of a loved one, or threats to their business.

Advisers have also told me they have gone “above and beyond” in small but significant ways: driving clients to appointments if needed, devoting significant time to helping technology-challenged clients, calling personally on homebound older clients, assisting clients with eldercare arrangements, or reaching out to clients suffering an illness.

Clients have also “stepped up”

This brings us to the other party deserving some praise—the investor clients of financial advisers.

A client or client family can be found on the flip side of just about every point mentioned above. They, too, have faced life’s daily challenges with fortitude, adapting to their new work, school, and home environments. They have been willing and active participants in new ways of partnering with their financial advisers. Clients are also to be commended for wanting to “make sure their financial houses are in top order during a period of great uncertainty,” as one adviser told me.

I have been particularly impressed with the fact that advisers say that their financial and investment educational efforts have paid off in real time this year. Few advisers say they received phone calls or emails expressing any panic or distress over plummeting markets in February or March. That is a tribute not only to the adviser-client relationships that have been developed, but also well-constructed financial plans, well-diversified investment allocations, and (for most advisers I have spoken with) a bias toward risk-managed investment strategies.

These factors have been supplemented by robust communications programs implemented by advisers, which were especially prevalent during the market decline. It is interesting that several advisers have said that their clients were voicing less concern during the first-quarter market plunge than they are now with an equity market that has defied belief (to the upside) for many. Adviser communications, as one adviser told me, continue to focus on “behavioral adherence” for clients to their investment plan, and clients are advised to try and filter out the ever-present noise from the financial press and airwaves.

The value of risk-managed strategies

If you are a financial adviser or investor with a relationship with Flexible Plan Investments (FPI), let’s also give some credit to FPI’s efforts in 2020, and the foundational work that has been done over prior years.

Advisers have said that FPI’s risk-managed strategies have multiple tangible benefits for their clients:

• Portfolios that work continuously to smooth out volatility and strive to avoid deep losses, while also taking advantage of market opportunity.
• Portfolio allocations that are customized to a client’s specific risk tolerance.
• Rules-based, sophisticated strategies that are always on “alert” behind the scenes, with the ability to implement changes as appropriate to the current market environment.

In general, advisers have told me that they are most interested in how strategies are performing for clients, no matter what the market is doing, and if they are managing risk in the way they were structurally designed. I believe FPI’s approach has lived up to those expectations in 2020.

FPI’s investment programs are supported by dedicated regional business consultants, a service staff focused on excellence, an experienced research and analytics team, and senior management with decades of experience and a track record of industry innovation.

One of FPI’s initiatives was particularly appropriate this year, as many families, private organizations, and public companies look to provide financial support to worthy charities.

In 2011, FPI added a new dimension to its principled-investing offerings by introducing the Principled Investing Give Back program. The program allows clients invested in FPI’s principled-investing strategies to designate 10 percent of the net advisory fees FPI collects for these strategies to a socially responsible charity or religious institution of their choice. This year, 143 charities received donations through the program.

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With news breaking on Monday (December 14) on the actual delivery of COVID vaccines for frontline health workers in several locations across the U.S., there is good reason for optimism for 2021. On behalf of Flexible Plan, I want to wish you and your family a happy and safe holiday season!