In the midst of a global pandemic, time seems distorted. Conditions that prevailed just a few weeks ago now feel eons away. Given how dramatically things have changed, it’s important to remember where we began, and that we’ll probably get back there — eventually.
While the research for this year’s Brokerage Report Card essentially was carried out in a different world, the results nevertheless reveal that the retail brokerage sector began this crisis from a position of exceptional strength. Research for the Report Card found that financial advisors’ average assets under management reached record levels in early 2020 and average productivity has soared.
Some of these gains were driven by rising markets, which have since fallen sharply, but much was attributable to advisors streamlining their businesses and tightening their focus on their most lucrative clients.
These trends all put brokerage advisors in a good position to endure this incomparable storm. To start, the average brokerage advisor had an obliging cushion of client assets at the beginning of the pandemic. The Report Card’s results indicate advisors’ revenue is overwhelmingly generated from recurring fees rather than commissions. This bodes well at a time when trading may be tricky.
Smaller client bases also mean fewer hands to hold, which should make the challenge of shepherding nervous charges through rocky market conditions a bit more manageable.
That’s not to say that this crisis is easy for the brokerage sector to navigate. A recent survey by the Investment Industry Association of Canada found that while the investment industry has adapted well to remote working arrangements in general, there are concerns about employee morale and the loss of connection inflicted by physical distancing requirements. This period of heightened fear, fraud and uncertainty will take its toll. Financial advisors are having their share of struggles.
But advisors were in a position of strength at the beginning of this crisis and, by all accounts, they are weathering it relatively well. So, while a return to “normal” looks likely to be a prolonged process, most advisors should be poised to help restore their clients, and themselves, to their pre-pandemic glory.