It is no secret that the economy has taken a major hit as a result of COVID-19. From March to April, the unemployment rate in the United States went from 4.4% to 14.7%, the highest it’s been since the Great Depression. From March 6th to March 18th, the S&P 500 Index lost 14.9% of its value, and the MSCI World Index showed a loss of 17.5% globally. Matthew Luzzetti, Chief U.S. Economist for Deutsche Bank, predicts that U.S. GDP will decrease by almost 40%.
Uncertainty about how the virus will behave going forward and when a vaccine will be available makes it difficult to predict when the economy will recover. Experts have conflicting opinions about whether the virus will continue slowing or whether there will be a second wave in the future. Additionally, there are varied projections for when a vaccine will be available, but most scientists predict that developing a vaccine could take 12 to 18 months. Even if the best-case scenario occurs, many economists, including Jonathan Wright of Johns Hopkins University and Allan Timmermann of the University of California at San Diego, believe that a full economic recovery could take years.
Why A Financial Advisor Is Even More Important Today
It makes sense to be scared when it comes to your finances. The typical investor has no idea how to position their portfolio during these uncertain times. Having a financial advisor is more important now than ever.
When searching for help with managing finances, many people tend to go to large, traditional financial institutions. However, these companies tend to be out of sync with modern times. A Fenergo survey revealed that although 99% of executives agree that underinvesting in technology directly negatively impacts customers’ experience, 33% had not invested in any new technology, and 67% had not partnered with a financial technology provider. These institutions’ evolved infrastructure limits their growth because transforming it is expensive and takes time.
In an article about trends in financial advising, Michael Kitces discusses the shift from large firms to small and independent firms: In 1999, Mark Hurley issued a report predicting mass consolidation in the financial advisory industry. He believed that a small number of large firms would dominate, pushing small and independent firms out of the industry. However, Kitces explains that due to the surge in technology-driven productivity enhancements, we’ve actually seen immense growth in the number of small firms. In the 1990s, the best advisor software, wirehouse proprietary software, was expensive and favored large firms. While small firms struggled to afford it, large firms could allocate development costs among a large base of advisors. Today, Kitces explains, “the software solutions for independent advisors have tens of thousands of users and far more resources to reinvest into their technology than any proprietary software (e.g., eMoney Advisor has more than 50,000 users, as many advisors as all wirehouses combined!).”
Kitces additionally points out that large firms are more likely to use an AUM business model, which only works for investors who have sufficiently large assets to manage in the first place. 80% of households do not. The rise in technology has allowed small and independent financial advisors to use alternative business models, based on income rather than assets. These firms can serve those in need of financial advice that cannot be reached under the AUM model. The reality is that the size of the firm no longer matters as long as you have a smart, technology-enabled advisor who knows what they are doing.
Technology Is Changing The Financial Advice Industry
Finance is not the only industry that technology is reshaping. Before the technological revolution, planning a trip involved physically going to a travel agency (or several, for price comparisons) for help planning a trip. Now, there are several mobile apps that make finding information and booking flights and hotels quicker and easier. In order to survive in the industry, today’s travel agents must be tech-savvy and able to connect with clients virtually at any time. The app store continues to grow as more and more industries become digital.
The global transformation from brick-and-mortar to digital businesses and markets began years ago, but economic restrictions caused by COVID-19 are causing this transformation to accelerate rapidly. Most businesses had to adapt quickly and figure out how to operate remotely. This put a lot of strain on traditional banks, which were already struggling to keep up with the pace of innovation and competition from firms already offering digital or mobile-only platforms. Because meeting with a financial advisor in person is not an option, the ideal person to help you with your finances today is a mobile advisor that is hyper-enabled by technology. Evati provides this service for you.
Evati is an entirely digital company that offers professional investment management services at a fraction of what investment advisors traditionally charge. Evati builds a diversified portfolio for you based on your personal situation and goals, and consistently monitors this portfolio to help ensure it is well-positioned and risk-aware as the market changes. The app securely provides email, a texting system, notifications, in-app messaging, and in-app blog content to ensure that you can reach your advisor whenever and wherever you need to. It helps you stay completely aware of your financial situation by displaying your progress in an easy-to-understand dashboard. With Evati, your advisor is at your fingertips, and your mind can be put at ease during these uncertain times and ongoing thereafter.