Since the outbreak of COVID 19, the whole world has been shaken up. All industries across the globe have been impacted – including investment management. Markets have been moving rapidly while uncertainty has been at an all-time high. This has caused a lot of confusion among investment managers and the kind of strategy to follow.
It’s clear that adapting to the new post-COVID world has presented its challenges. The global pandemic has led to financial managers having to venture into new territories. While the industry has faced some of its biggest challenges, it is important to realize that the markets will survive and bounce back.
However, when and how it will bounce back is not yet clear. Until then, here are some of the ways that the investment management industry has been impacted by COVID-19. By understanding how it’s shifted the financial market, advisors can easily adapt and strategize the best way forward for their firm and their clients.
COVID-19’s Impact on the Investment Management Industry:
Volatility
When the outbreak of COVID-19 went worldwide, the reaction was immediate and this was reflected in the global markets. Market volatility has been at the fore for all financial advisors as it’s shaken up their portfolios, their clients’ funds, and their workforce.
Furthermore, many markets that once presented as a solid solution have taken large falls, while others have succeeded. Market volatility has been one of the most challenging aspects of investment strategies during this pandemic, and it has caused many investors to take a new approach. It is the volatility that has led to so many changes within this industry.
Certain funds, such as passive funds tracking equity and bond indexes have been exposed to the full extent of market volatility. These funds have been very popular with investors in the past, but since the beginning of the crisis, they have faced some major losses.
The volatility of the market is one thing that has scared off many new investors. While the markets have been fairly chaotic, certain funds are better equipped to mitigate risk and provide good performance. For example, many active equity funds performed very well during the early stages of the COVID pandemic. However, many investors have had their doubts on the potential risks and unknowns in such funds.
While there is never absolute certainty when it comes to investment management, the risks and volatility are not usually as elevated as they are now. While this could pose a threat to many new investors, high risks can also mean high rewards.
Client Needs
With market volatility being such a prominent factor, this has resulted in clients becoming a lot needier. Where asset managers would once just be left in charge of simply managing their funds, clients that have faced major losses may be more inclined to become involved in the investment process.
With so much client loss occurring, this has also resulted in a shift in clients and how they respond to asset managers. Clients may approach their fund managers differently, and expect new levels of involvement in order to navigate through this turbulent time. Client loss, a shift in portfolio management, and a change in needs and behavior has been a significant aspect during the COVID 19 crisis. Of course, this means more dedication and focus coming from investment managers.
It is important for investment managers to be clear with their clients during this time, and keep them in the loop. This may be a turbulent time for investments, but it is something that we will get through. Being communicative and understanding your client’s needs has been an important process during this time.
Digitalization
No matter what industry you are looking at, since the outbreak of COVID the whole world has adopted the digital space in a new way. People have been forced to work remotely, and avoid in-person contact with each other. This has resulted in a new approach to work and client relations for investment managers.
This massive shift towards digitalization has led to the more widespread use of SaaS platforms. Asset managers are taking a more involved approach to the use of software, with many great options being available. Having a SaaS that’s tailored to the investment management industry has proven to be key while we stay home and accommodate clients.
Since the outbreak of the virus, we have seen a large scale adoption of working with digital platforms. This seems to be the future of the industry, and it is a shift that could drive a great deal of financial growth.
Investing For The Long Term
In the world of investments, there will always be crashes. As scary as this can be, it should also help investors to realize the value of long term solutions. With the impact of COVID-19 and all of the changes that we have had to adapt to, the value of long-term investments has become evident.
While many people may feel the need to pull out of their investments, now would be a good time to wait it out. Markets do recover, and any downfalls experienced now do not necessarily point towards a permanent issue. While it may be tempting to shift gears into short term (and perhaps immediate reward) investments, it’s the long game that offers the most benefits.
Those interested in long term investments should also consider investing now. While the markets have been incredibly turbulent, getting involved during a low stage offers plenty of potential upside for the future. With the right investment strategy, your clients can grow their portfolio to not only be beneficial right now but to draw in long term results too.
Final Thoughts
With investment management, one always needs to understand the risks and potential dangers that are present. However, with risk comes plenty of opportunities. The industry may have experienced some of its most difficult times to navigate through, but it also presents new investors with some exciting prospects.