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For financial professionals, a quarter that ended with stunning market declines was followed by the best quarter in two decades. Severe volatility from COVID-19 tested their mettle, as did changing working conditions that presaged future changes to the advisory business. Through it all, professionals remained optimistic, not only about market performance but also about the growth of their own businesses.

Even at the height of volatility, US professionals polled by the Natixis Center for Investor Insight remained unruffled, as evidenced by survey results from March and April in which they foresaw only a modest 3.6% loss for the S&P 500 for the year.1 At the time, the S&P 500 had dropped as much as 34% off its highs; yet, by June 17, it already had climbed back to a 3.58% one-year loss.

While the markets have recovered, this spring’s collapse did sweep away one myth: that passive investments would provide downside protection, something believed by 71% of investors in an earlier Natixis survey.2 The rapid slide of passive portfolios earlier this year won’t be forgotten. With the potential for continued volatility, financial professionals are considering what investments can help them better manage portfolios, with most (80%) saying this market favors active.3

Despite the markets’ recovery, financial professionals still see risk. Market volatility (78%) tops their concerns for 2020, but 64% also worry about recession.4 Concerns such as high unemployment, a second outbreak of COVID-19 and geopolitical risks weigh on their minds.

From Business as Usual to Business Unusual
Even as they contemplate market challenges, financial professionals are optimistic about their own practices. On average, they forecast growth of 7.2% in 2020 and 17.2% over the next three years.5 Yet increasing competition makes such goals challenging.

In the near term, 60% of professionals see their own peers as their strongest competitors. Far fewer worry about robo-advisors (9%), new entrants (11%) or DIY tools for investors (18%). Yet fast forward five years and the competitive landscape flips, with only 25% concerned about traditional competitors. However, worries abound about Google, Apple or other disruptors entering the advice business (25%), DIY tools (24%) and robo platforms (23%).6

Professionals are already stepping up their game: The switch to a more efficient, tech-savvy practice during the pandemic is likely to stick for them. Half say they will leverage technology such as their customer relationship management (CRM) system to make their practice more efficient.

Planning for growth, they also are looking for ways to scale their business. Model portfolios are emerging as a go-to solution to deliver a consistent experience: Two-thirds (67%) say model portfolios help them scale their businesses, and large numbers say they make client reviews more efficient and more consistent (43%) and lower their administrative burden (42%).7

The outlook for financial professionals and their clients is good for the second half of 2020, despite risks that could challenge the recovery. After managing the pandemic market, professionals are using this time to reposition client portfolios and adopt new business strategies identified through this spring’s experiences. Those who adapt will emerge well-positioned to achieve their growth goals.
1, 3, 4, 5, 6, 7 Natixis Investment Managers, US Survey of Financial Professionals, conducted by CoreData Research, March-April 2020. Survey included 2,700 financial professionals in 16 countries, including 300 in the United States.
2 Natixis Investment Managers, US Survey of Individual Investors, conducted by CoreData Research, March 2019. Survey included 9,100 respondents, including 750 in the United States.

All investing involves risk, including the risk of loss. Asset allocation strategies do not guarantee a profit or protect against a loss. Unlike passive investments, there are no indexes that an active investment attempts to track or replicate. Thus, the ability of an active investment to achieve its objectives will depend on the effectiveness of the investment manager.

Natixis Distribution, L.P. is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers.

Natixis Investment Managers includes all of the investment management and distribution entities affiliated with Natixis Distribution, L.P. and Natixis Investment Managers S.A.