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Tighter times call for intermediaries to show agility

[Translate to Spanish:] Business strategy after Covid-19

The 2020 Covid-19 pandemic is likely to prove a turning point for many businesses, including intermediaries. It’s a time to review business strategy, with the primary objective of adapting to stay close to clients.




When the global pandemic triggered panic in financial markets in March, all wealth managers met with liquidity squeezes and some of their clients faced margin calls. But arguably the greatest consequences for intermediaries are still to come over the next few years.

While Covid-19’s lasting implications are still not entirely clear, it seems likely to be a catalyst for rapid economic and societal change that started already a while ago. In this new world, technology will yet be more important, people will travel less, staff will have got used to working from home more, and governments will have an urgent need to raise taxes to repair national finances.

It’s fair to say that 2020 will prove to be a turning point for most business sectors, including financial services generally and wealth management in particular. Charles Darwin, the 19th Century English naturalist, is often cited in business school texts as saying that it’s the most adaptable rather than the strongest of a species that survive. If there are rapid changes occurring for intermediaries, or external asset managers – as seems the case – then it is the most agile firms that are likely to emerge from the crisis in good shape. 

Already during the recent market turbulence, we have noticed a difference between those intermediaries equipped to perform well at such times and those not. One concrete example: In some of the most volatile markets ever, those firms with automated portfolio management systems connected directly to Julius Baer and traded with us instantly, both when markets were falling and rising. By contrast, those relying on manual systems such as phone and email found it far harder to place orders.

Covid-19’s lasting implications
Looking to the medium term, regardless of whether a vaccine is developed the pandemic will leave lasting implications. For a start, physical distancing has turbocharged the move towards using technology for communicating. Clients are likely to continue to want to interact digitally, especially if they have got used to communicating with their relationship managers through mediums such as Video calls. It seems unlikely that people will travel so much to visit clients for some time to come. 

Turning to employees, even if the need for physical distancing recedes, people will have become accustomed to the convenience of working from home. In this world, how can intermediaries lead their workforces to make sure that there’s a good balance of productivity, flexibility and time management? Trust and self-organisation will become critical. How a firm manages these issues will affect not only how it supplies services to clients but also how attractive it is as an employer.

Finally, the topic of repairing government finances after the huge economic support packages will be on the agenda for many years. Higher inflation may erode some of the debt, but inevitably increasing taxes must be part of the solution. That means intermediaries’ clients are likely to need wealth planning to protect their assets as far as legally possible. Not all firms have this expertise, but it is possible to source from a partner such as Julius Baer.

Adapting strategy
With clients’ requirements likely to change so fast in the next few years, it’s a critical time for intermediaries to review their strategies. Doing so might reveal a need to invest in certain areas of the business, as well as to shift priorities. Which business lines add value and which are not leading edge? At the same time, many intermediaries face significant margin pressures, resulting from uncertain asset values and greater regulation, especially in Switzerland. That ratchets up the pressure for intermediaries to review their strategies and adapt. 

Technology evidently can help. Just as we saw the intermediaries with the best technology adjust most quickly to the volatile market conditions, so the crisis has initiated clients to Video calls as a means of virtual communication. These are convenient ways to keep close to clients, discussing markets, making proposals and bringing experts to the table. In future, websites and web portals will become vital branding tools and entry points to the firm, and firms are likely to have to learn to prospect clients digitally.

The FinTech industry may fuel new ideas. Some of these start-ups are under strain as cash dwindles and future funding becomes harder to secure. That may lead to opportunities to acquire technologies that could lead your firm in new directions.

Looking forward to an end of this crisis, it seems likely that the new ways learnt during this time will blend with the old practised beforehand. Intermediaries, like banks, will have to adapt, finding the best ways to stay close to and interact with clients, providing the personalised services that they require.

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> Please contact us if you want to learn more about our services for intermediaries.