Illustration by Dave Cutler

It’s easy to feel that if we hear the words “new normal” one more time, we’re just going to scream. Loudly. And with great frustration. But here’s the rub: Normal will never be the way it was before March 2020. No matter what words you use, how consumers are behaving and how advisors are relating are like nothing anyone could have imagined in February of this year.

But what if some good — some long-lasting, deep-seated difference in how consumers handle their finances and view risk products — could come out of the mess that is 2020?

“The way consumers spend their money has changed. People have reduced their need for travel, entertainment and luxury purchases,” said Renyu Xu, an eight-year MDRT member from LaSalle, Quebec, Canada. “They are buying only what they need to live, and rethinking life and health protection products.”

Also, the reality of suddenly losing income or assets due to the pandemic’s economic fallout has made it easier for advisors to ask a critical question of clients: If you can’t sustain your family’s financial health during four or five months of economic hardship, what will 30 years
of retirement look like?

Back to consumer behavior

OK, so consumers are buying fewer cups of Starbucks coffee and not jetting off on expensive vacations. But when you really get down to the nitty gritty, what exactly has changed in consumer habits?

Let’s start with one of the most basic elements of financial planning. For years, you’ve probably preached about the differences between wants and needs. Unfortunately, many consumers didn’t see the difference. That is until a pandemic wreaked financial havoc.

This pandemic led consumers to shift their lifestyle choices, focusing more on the necessities in life rather than wants, which have been set aside, said Agnes Ng, an eight-year member from Makati, Philippines. “From normally dining out to cooking at home and eating healthier food; to more awareness of adding a medical plan and insurance protection plan. Looking at the bigger perspective, this pandemic has really brought more positive results than expected.”

And the changes have spanned age groups and generations. “The pandemic opened a new era of frugality, especially for my generation (millennials). Young people have become less materialistic,” said Kimberly Anne Zandueta, a five-year member also from Makati. She notes that consumers are afraid of financial uncertainty and have focused their spending on essentials such as groceries and household supplies.

Another area some consumers are now seeing as a need instead of a want revolves around risk protection. With new health concerns, advisors are seeing attitude shifts around consumers’ increased understanding of the importance of protection, especially in terms of continuity of income. Many are feeling a renewed sense of urgency to review their current protection to see if it’s adequate.

Consumers look for help

The crisis has also left consumers less certain of their ability to manage their finances without an advisor. In Australia, there is a strong presence of financial planning DIY books and social media disruptors claiming advice is an easy process that can be achieved through low-cost robo-advisors, explained Nick Longo, ADFP.

“This pandemic and economic crisis has proven that there are no shortcuts. The DIY books and robo-advice have limited reach, in particular in dealing with a crisis such as this. It isn’t personal enough and doesn’t go into detail relating to an individual’s circumstances.”

Longo, a three-year member from Richmond, Victoria, Australia, has seen a shift toward consumers seeking comprehensive and holistic advice tailored to their individual needs and circumstances through an experienced financial planner.

And some clients also have more time in general to talk about their finances, as so much has slowed down or halted. Glen Wong has many high-net-worth clients who were often too busy to meet with him and review their financial planning.

During the past months, he has been calling most of his clients and finally reached one who had been so busy prior to the pandemic that it was nearly impossible to set up time to talk with him. This time, Wong not only reached the client, but spent more than an hour
on the phone.

“What came out of that call was that he wanted to set up $13 million coverage of life insurance,” said Wong, a six-year member from Hong Kong, China. “When this case is completed, it will be the biggest deal in my seven years as a wealth management advisor.”

Consumers are facing their own mortality

As the pandemic rages and wanes in every corner of the world, more consumers are realizing the value of life insurance. And, as we understand more about the long-term effects of the virus, consumer interest in health, critical illness and disability insurance policies has increased.

“It has made people think of their own mortality more. I have seen an increase in people wanting to review their life insurance, and also discuss their wills and estate planning,” said Bhupinder S. Anand, ACII, Dip PFS. “We have also had a few death claims related to COVID-19, and resulting work from probate planning and investment.”

“I’m also explaining to clients that life insurance premiums are likely to rise, as insurers are paying more claims than expected, and are worried about COVID-19 survivors having long-term health problems and potentially even exclusions,” said Anand, a 24-year member from Gerrards Cross, England.

Dealing with the virtual effects

And, of course, the most obvious change since the pandemic began: The high-touch and face-to-face method of financial services has gone virtual, and many consumers may never go back. It turns out many like the idea of meeting virtually with their advisor. So the Zoom lifestyle may stay for good, even after the pandemic fades into history.

Joel Phillip Campbell, ADFS, FChFP, agrees. “We have had a lot of clients tell us they would like to stick with Zoom meetings, as it saves them time,” said Campbell, a 15-year member from Sydney, Australia. “Some have said it’s not as much of a burden to do a review each year because it’s easier to do by Zoom than to travel to us.”

Virtual meetings have made it easier for advisors to invite and involve spouses and children into the meeting room. Where once it was impossible to get some working couples together in the same room, now they simply open their laptop and join the call together. It has also helped working parents. For instance, one mom scheduled time to talk with her advisor while her young child took a nap.

It’s not just clients who like meeting online. The virtual workplace is something some advisors are planning to continue in their own practice as well, even when life returns to some semblance of normality. The extra hours in the day from not having to commute, the chance to meet virtually with 10 people a day instead of driving to meet with three, and the ability for busy clients to fit a call into their days means virtual meetings likely aren’t going away.

The client’s input about Zoom has actually made Campbell start to think about his own lifestyle choices, especially in terms of where he lives and where his office is placed. “We may not be relying on the office moving forward, but relying more on technology and our home office.”

For advisors who were used to being on the road or hopping on airplanes to meet with clients, the forced shutdown has given them time to reimagine a life of working with clients, while having more time for family.

“I’ve cut travel by 95% and expenses by 62%, and I’ve never had better balance in my life,” said Alessandro M. Forte, FPFS, a 22-year member from London, England. “Change will always be daunting, but if we embrace it, it can be transformational.” 

Clients seek peace of mind during economic chaos

Financial issues around job security and the health crisis can keep breadwinners awake at night, said Arlyn Tiong Tan, MBA, FChFP, a 14-year member from Manila, Philippines. The grief caused by the deaths of friends and family, and helplessness from the continuous streams of COVID-19 news can be overwhelming.

“Seeking financial advice from an advisor is an action to secure mental wellness,” Tan said. “Anxiety can be addressed with planning, conversations with experts and purchasing insurance that provides security.”

Jennifer Claudette Khan, FSCP, MFA, found clients had that same sense of relief in her home of Trinidad and Tobago. The onset of the pandemic caught many by surprise, and they weren’t prepared with a contingency plan. They didn’t have an emergency fund set aside, and many were operating paycheck to paycheck.

“I was privileged to be able to share and advise many of them to be better prepared going forward,” said Khan, a 26-year member. “This really gave me a sense of purpose as I saw the relief on their faces as they implemented the ideas and plans I recommended. Their attitude toward financial management changed for the better when they realized they had the ability
to influence their future lifestyle by the decisions they made now with my guidance.”

Khan had one client, a single mother with two young children, who had spent lavishly, with little regard for unforeseen situations. With the onset of the pandemic, she was not able to adequately provide for herself and her family, even though she earned a good income.

Khan helped her reorganize her finances so she could get through the immediate crisis. The client soon realized she needed to save a lot more, and segment her savings into different areas for possible contingencies as they arise.

“With my guidance, she felt comfortable going forward that she and her children will be in a much better position should a similar situation present itself.”