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Short-term Pain, Long-term Gain

2020 may not be the year global asset managers envisioned, but it’s unlikely to affect long-term growth prospects according to analysis by Cerulli Associates. In addition, compared to the outlook in March, the outlook is much less bleak than originally projected. 

Cerulli projects that global assets under management (AUM) will decline by $1.7 trillion in 2020, falling from $104.4 trillion (end of 2019) to $102.7 trillion. While a decline of less than 2% may not seem significant, especially given the extraordinary circumstances of this year, it does mark the first decline in global assets under management in over a decade. Declines are expected to occur primarily in the U.S. and Europe. 

However, Cerulli also believes that the long-term growth trajectory of asset management is positive and will be driven by rising demand in developing countries. The firm expects global AUM to top $130 trillion by 2024, representing a solid annualized growth in the 8% range. 

It will take some time for investors to feel comfortable again, and more conservative investment behavior, including increased liquidity, particularly given current overall bond yields and the yield curve itself. This will likely come at the expense of equity investments. 

The lesson for asset managers is three-fold. First, things are not that bad, and, not nearly as bad as projected earlier in the year. Second, is that asset managers need to be aware of and responsive to potential short-term shifts in risk attitudes and subsequent investment preference. Finally, asset managers must take the same long-term view that they recommend to their institutional and retail clients and resist reacting emotionally to the markets.

The Pace of Change

A recent Broadridge survey of North America’s financial advisors had some relatively dramatic findings. 

In the context of fundamental changes to client relationships catalyzed by the environment resulting from the pandemic, 77% of financial advisors said they lost business as a result of not having the appropriate technology tools to interact with clients. Those that lost business reported an average drop of a substantial 22% of their book. A full 87% of advisors reported that they thought recent changes in investor communications and engagement would be sustained over time.

The lack of suitable technologies compromises advisors’ relationships with their clients. But it also threatens the viability of wealth firms who risk losing their advisors to firms that already employ next-generation wealth platforms. While it was impossible to foresee the onset and impact of COVID-19, advisor communications technology was evolving relatively rapidly before the onset of social distancing, as new electronic communications technologies were refined and increasingly adopted by forward looking investment firms. The lesson of the current situation may be that accelerating the adoption of new technologies to stay ahead of the technological curve is a strategy that pays off in the end.

A New Generation of Active Traders?

This year has seen a remarkable rise in account growth and retail trading activity across both leading and upstart discount brokerages. Consider the following:

• Fidelity added a record 1.2 million new retail accounts in Q2 with daily equity trades doubling to 2.3 million.

• Charles Schwab added 552,000 new accounts (1.6 million if you count the USAA acquisition) in Q2 2020. Daily trading rose to 1.6 million, a 126% jump over the same period last year.

• With over 650,000 new accounts in the first half of 2020, E*Trade enjoyed greater retail organic asset growth in the first half of the year than in the previous two years combined. A daily trading level of 1.01 million in June for the firm and was 267% higher than in 2019. 

• Most impressive of all was the new player on the block. Robinhood, despite having significant technical issues in March, added over 3 million new accounts in 2020 and posted an industry leading 4.3 million daily average trades in June.

Conditions in the second quarter were a kind of perfect storm – in a positive sense – for self-directed brokerage. The foundation was laid last fall when the leading discount brokerages followed Robinhood’s lead in slashing their commissions for online trades to zero. Some added an additional incentive to less well-heeled traders by allowing fractional share purchases. Then the pandemic hit, introducing extreme market volatility, and with it the potential for extreme profits. Social distancing and the economic shutdown also left a good cross section of the potential trading population, both young and old, at home with little to do and no way to make money. 

While conditions this year were highly conducive to growth for discount brokerages, the level of growth is still impressive. Just the four companies cited above added over 6 million new accounts in just a few months. 

It will be interesting to see how long this spike in interest persists and whether it creates a new, sizable market segment of investors that are more comfortable with active trading, at least for a portion of their portfolios.


Building Awareness and Trust Remotely

It’s been six months since coronavirus became a household word globally, and resilient businesses have adapted to a new (and hopefully temporary) world of social distancing.  

Wealth advisors have likewise had to adjust. How do you demonstrate your thought leadership and value-add when you can’t connect with prospects at a local event?

One way is to host a compelling webinar to engage with clients and prospects and build your business. Below are some helpful tips to conduct successful webinars:

Set your objective. Every webinar you host should have a specific goal that influences every other step you take. Are you prospecting to build your business? Educating and addressing client issues for retention purposes? Develop your content, target list and marketing plan accordingly.

Choose your platform. There are different software options with varying features and limitations. Popular video conferencing platforms include Zoom, Microsoft Teams, GoToMeeting and Google Meet. Determine the option that works best for your organization. 

Determine the format. There are several ways to structure a webinar, such as interview style, Q&A or, most common, presentation format, which is an onscreen presentation along with pre-written notes.

Prepare your presentation. If you are using presentation format, there are important factors to keep in mind for presenting remotely. Keep it brief:

• Write for your target

• Make the slides easy to read

• Prepare a script and stick to it

• Engage your audience

• Interact with your audience

Include a call to action (and contact information)

Build your audience. For a client-only event, stick to email. If you’re open to including prospects, social media (which you can boost for added reach) will widen the net. Things to keep in mind when developing your invitation:

• Email twice, the first time about one to two weeks out with one or two ‘it’s not too late’ follow-ups 

• If you’re using social media, be sure to include link to register

Hold a dry run…or two. Before you host a webinar, rehearse to make sure everything works and presenters are comfortable. Check that your audio is clear and electronics are plugged in and/or fully charged. 

Follow up with participants. Send a thank you email with a link, if possible, to the presentation, using this opportunity to (softly) promote your business.

Track your results. Measure the number of people who opened your email invitations and the click through rate of people who registered for the webinar (via email and social media) and the number who actually attended. If you’re not generating the response you anticipated, adjust variables for the next one until you feel confident you’re maximizing response.


Is your firm missing out on the best leaders?

It isn’t news that women are underrepresented in senior executive positions. This is despite the fact that, according to research by Catalyst (and similar to the findings of other research conducted), women earn more degrees than men and represent over half of the labor force. In fact, women represent only 5% of CEOs of S&P 500 companies. 

Yet research also shows that women make effective leaders, with studies such as one by Credit Suisse finding that “Companies with more female executives in decision-making positions continue to generate stronger market returns and superior profits…” In other words, companies that make an active effort to have significant representation of women in senior leadership roles are well-positioned to outperform their competition.

Female executives gain traction in financial services
Financial services is no exception, although the good news is women continue to make modest gains in landing executive roles within financial services companies. According to Oliver Wyman’s Women in Financial Services 2020 paper, women are now reaching executive positions at the highest rate since they began tracking the statistic in 2003. According to the report, executive committees are now comprised of 20% women, with boards made up of 23% women. There are a significant number of outperformers as well – 26% of firms have more than 30% women at executive committee level, while 37% of firms have reached that figure for board representation.

Room for improvement
When it comes to reaching the top spot in financial services, however, women are still vastly underrepresented. According to Deloitte’s Diversifying the Path to CEO in Financial Services, current CEOs at the companies they studied are almost all male and predominantly drawn from three talent pools — lines of business, operations, and finance. Unfortunately, women are generally underrepresented in these categories. According to the report, women tend to have a much higher representation in areas not historically considered CEO or other front-line leadership pipelines, such as talent (66%) and marketing/business development (48%).

The path to gender equality at the highest ranks
Firms with targeted initiatives to increase representation of women in senior management and the C-Suite can position themselves for strong future growth. Ramping up recruiting efforts for women to join traditional CEO training grounds, developing specific training programs, and encouraging mentorship are all proven ways to promote diversity and inclusion at the top, which is good for both society and businesses.  

Let’s get together..digitally

In June, Morgan Stanley and Oliver Wyman published a “blue paper” entitled After the Storm, discussing the ways that COVID-19 “has permanently changed the way Wealth Managers deliver advice and serve their clients.” 

The study identifies four areas of focus necessary to be a top performer:
1. Investment in technology
2. Strategic cost-cutting
3. Differentiated product offerings
4. Inorganic growth opportunities

Not surprisingly, much of the discussion on technology pertains to driving engagement through digital touchpoints. The current environment reinforces the value that a live person can add during times of turmoil. Even prior to COVID-19, a survey of HNW investors conducted by Oliver Wyman found that more than 85% of investors value the ability to talk with an advisor, while less than one-third value advice delivered through a robo-advisor. However, as we all have seen, the way in which human advice and interaction can effectively occur has changed significantly over the past six months. The study found that in Q1 2020, digital engagement across all digital channels increased seven to ten times for select leading managers, with significant impact noted in research consumption, client facing webinars and virtual client visits.

Importantly, this trend is expected to continue, with the survey estimating that by 2024, only about one-fifth of interactions will be face to face, with 35% taking place telephonically, via video conferencing or through live chat.

The implications of this are clear. Advisors who think this is a temporary trend and do not make the effort to adapt will find it difficult to keep pace with those who do in terms of business development and relationship building. Wealth management groups that are part of larger entities with deeper pockets to invest in technological innovations may be able to benefit from this advantage. As an example, Merrill Lynch is investing significantly in refining and improving its Personal Wealth Analysis integrated financial planning/asset management tools as a way to better engage with its clients digitally. Smaller advisors must find ways to leverage outsource technology options to keep up or risk being left behind in client acquisition and retention.    

From Pillars to Pixels

Since the turn of the 20th Century, brick and mortar has played an important role for financial service companies. From metropolis to small town, many of the most prominent and iconic buildings shaping U.S. skylines have been banks, trusts, insurance companies and brokerage firms. 

These buildings had use value. They housed staff, management and operations and provided suitable delivery platforms to serve clients. But utility did not explain their architectural presence and grandeur. Beyond the practical, they seemed designed in large part to concretize what were essentially abstract and ephemeral services. From Greek Revival, to Deco, to modern steel and glass, the size and solidity of these structures were expressions of strength, longevity, stability, commitment, sophistication and success. They were built to engender trust, respect, and even awe among those who experienced them and they served as tangible proof statements of companies’ substance and stature in the marketplace.  

Fast forward to today. The virus has accelerated a technology driven trend already afoot, to move away from the physical office. Many wealth managers, among other financial service providers, are realizing that operations can successfully be managed remotely. Perhaps, more importantly, recent experience is leading organizations to conclude that current client relations may also not be compromised by relying solely on electronic interactions. Virtual personal relationships with clients seem as strong as in-person ones. The result is that organizations are considering downsizing their office presence or even eliminating maintaining an office at all. Since leases tend to be the next highest expense for most RIAs behind comp, and travel and scheduling can be a drag on productivity, the decision to go fully remote may be a win-win.

But, before we give up on offices altogether, there are some intangibles that a physical “storefront” offers. It can play an important role in legitimating the firm to new prospects, giving it a concrete and undeniable reality. A well-architected office at a desirable address can convey prestige and trust to an otherwise wary prospect. And while Zoom, GoToMeeting, Teams and other technologies have undoubtedly made viable what would otherwise have been an untenable business situation, there is still much to be said for those in-person casual ad hoc conversations that take place and often are the source of some of the best ideas. It remains to be seen how many advisory firms and wealth managers, particularly the larger ones, will be willing to risk these apparent advantages to abandon brick and mortar entirely. 

Is Work from Home Here to Stay? ETFs say yes.

Overnight, working from home became the new normal for many around the world, particularly those working in large cities. It is not surprising that investment strategies recognize this trend.  

In June, Direxion, a firm specializing in leveraged ETFs, launched the first work from home ETF (ticker: WFH). The fund invests in companies designed to facilitate remote working, “ranging from software, cloud computing and cybersecurity to online videoconferencing and project management.” While names include the newer favorites of those working from home, such as Zoom, stalwarts like Amazon, Facebook, Microsoft, IBM and Alphabet are also part of its investments.  

On its website, Direxion identifies these Trends in Motion driving WFH investments:

Following Direxion’s introduction of WFH, BlackRock is planning to launch its iShares Virtual Work and Life Multisector ETF, which, per its SEC Filing, “will seek to track the investment results of an index composed of U.S. and non-U.S. companies that ‘provide products, services and technology that empower individuals to work remotely, and support an increasingly virtual way of life across entertainment, wellness and learning.’”  

While we have seen “fad” funds come and go, this does not appear to be the case with these recent developments. These new fund launches support what most asset managers, others with whom we have spoken to and Optima Group believe to be a fundamental shift in the way business, and, to some extent, life is conducted. It is likely that we will see more entrants to this space and other strategies related thematically to fundamental shifts resulting from the pandemic, like the ETFMG Treatments, Testing and Advancements ETF (ticker: GERM), which invests in biotech companies involved in the testing and treatment of infectious diseases. This ETF launched in mid-June and has over $70 million in AUM. These specialized ETFs provide cost-effective ways for wealth managers to provide client portfolios with exposure to specialized asset categories that align with their firms’ long-term capital markets and investment outlook.

How to Get a Handle on Twitter

Want a low cost way to grow your brand organically and generate leads? Open a Twitter account for your business. You just need a profile, header photo, account handle, and a brief company bio and you’re ready to go! 

Why tweet? Everyone is doing it! Even @RoyalFamily! There are 1.3 billion Twitter accounts, and chances are, most of your clients are on Twitter. You’ll position yourself as relevant and current! 

Tag others, like @optimagroupinc, to leverage your network for greater coverage and use a few relevant hashtags, such as #WealthAdvisor or #FinancialPlanning (or boost your posts) to expand your reach and join trending conversations. 

Make the most of each tweet by including a link to a specific page on your website or other CTA aligned with your goals.

No need to limit your tweets to your own content. You can also retweet helpful articles and ideas along with your comments. For example, see why now is the time to delight wealth clients digitally.

The State of Financial Services Marketing

A recent report by Deloitte, “The CMO Survey: Special Edition Report – COVID-19 and the State of Marketing,” has confirmed what leading firms already know: marketing is continuing to increase in importance in light of the challenges faced by the COVID-19 pandemic. 

Based on our experience and our observations, we couldn’t agree more. As the following statistic from the Deloitte survey shows, the role of communications during turbulent times is even more critical for engaging with your clients and prospects.

Source: Deloitte’s The CMO Survey: Special Edition Report COVID-19 and the State of Marketing

While the survey covered multiple topics and interviews with CMOs across a broad range of industries, we’ve highlighted two additional findings from the survey which we believe are particularly important for financial services marketers.

Source: Deloitte’s The CMO Survey: Special Edition Report COVID-19 and the State of Marketing

Source: Deloitte’s The CMO Survey: Special Edition Report COVID-19 and the State of Marketing

Based on these findings, we posit the following:

Brand relevancy rules – Leading firms are using these turbulent times to do the legwork that is going to position their firms for the long term. While traditional sales and lead generation activities face steep challenges for the foreseeable future, it is precisely the right time to engage in activities to refine and promote your brand in a way that aligns with the current period. Doing so will help to reassure clients that your firm is viable and continuing to thrive amid uncertain times, while also laying the groundwork for more aggressive sales & marketing programs down the road.

You need exceptional content – Content marketing is now table stakes for engaging both customers and prospects. And, clearly, not all content is created equal. Get too technical and you’ll lose your readers. Delivering content that is not informative is a non-starter. Leading financial firms distinguish themselves through superior quality. They employ content specialists with technical knowledge combined with a deep understanding of their target audiences to develop compelling, topical content that people actually want to read. While COVID-19 content is clearly still on everyone’s minds, now is the time to build-out a more robust content calendar that goes beyond pandemic-related communications.

Social media has become table stakes – Once eschewed by financial professionals due to compliance concerns, savvy financial marketers are now fully embracing social media, incorporating robust social media review and surveillance tools and protocols as part of their standard operating procedures. While funding for large-scale marketing initiatives may be in question at the moment, executing targeted social media programs continues to gain prominence as a cost-effective way to stay in front of your key audiences during uncertain times and beyond.