When unprecedented social, economic health patterns change and a new normal arises, there is no template to fall back upon in anything in life. Financial impact due to the pandemic caused job loss, reduced salary incomes and made business continuity an uncertainty. This made investors seek safety and wealth preservation.
What are investors looking for after the pandemic?
Today’s investor is looking for investment strategies that cover Environmental Social and Governance (ESG) themes. Social and ethically responsible sectors, resource protection – both environmental and employee, and corporate ethics are at the forefront of investing themes. Investors are seeking safety, wealth preservation and wanting a portfolio strategy that is resilient and sustainable. Even, if this comes at the cost of lower returns.
It is important to maintain longevity of portfolio and wealth creation in line with their goals and objectives. The change that covid-19 has triggered has brought a lot of impacts. With changing dynamics, longer working hours due to work from home model, change in working conditions, those investors who were 5-7 years away from retirement are taking early retirement against their planned dates.
During most of the annual goal review discussions, expenses towards travel, eating out, telephone, petrol, gym facilities have reduced and with the scare of the pandemic, investors are looking to secure what they already have and in fact, add more committed to save for their goals.
The younger generation, who lived in the world of fast cars, top-notch gadgets are asking questions about retirement – something they felt belonged to another era from when they were born. Their interest in creating a financial plan and have a check on their current investments has gained importance. All round people seem to be in a consolidation and preservation phase.
Asset Allocation and Portfolio Diversification:
Given that the markets fell heavily in March 2020 when the pandemic struck created fear among investors. Uncertainty struck in an already bleak climate of Covid-19 and some DIY investors exited in panic. This was because of an unclear understanding of things that may unfold due to the pandemic. Added to this fatality was the looming fear of corporate ethics and practices, which affected fixed income investments in a big way – especially on the credit risk side.
They say opportunities arise in the midst of mayhem and gloom. This is when newer asset classes gained importance. ETFs became the preferred low cost passive investment strategy and gained ground worldwide. Gold as an asset class investment gained importance. Multi Asset Funds gained more importance and unique investment styles and strategies came up. International equity investment gained traction because the performance of international markets in the calendar year 2019 seemed to outweigh the Indian BSE Index. The need to invest in negatively correlated asset classes became clearer because of uncertainty and market volatility.
Enquiries about insurance policies increased. The general need to increase medical insurance gained importance. Employees from companies although still hesitant and content with the company health insurance benefits provided by their employers, did enquire how to take independent health insurance.
Unfortunately, sometimes, it takes life-threatening events to follow the financial advisors advice. Covid 19 made clients ask about health insurance more.
Today investors are looking for SEBI Registered Investment Advisors, Certified Financial Planners, Certified Wealth Managers, and Chartered Financial Analysts who have the qualification, experience, certification and ethics to back their professional expertise.
Money conversations are very confidential and require trust at the forefront. Investors are willing to pay a professional fee for valuable advice and need based association.
They in turn expect close interactions, situational analysis, scenario analysis and comprehensive recommendations from their advisors. There is a need for professional advisors and hopefully more women advisors to help investors in their lifelong journey of financial independence.
(The writer is the founder of Dilzer Consultants Pvt Ltd, a SEBI Registered Investment Advisory firm, based out of Bengaluru)
