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How COVID-19 is shaping retirement and savings trends

The future of financial planning: part one

Published: 06/05/2021
With the help of top financial advisers, we take a closer look at the impact of the pandemic on client conversations in the retirement and savings space.

Covid-19 has had a profound effect on our lives over the last 13 months, not least on how we manage our money. While many people have faced financial hardship, others have seen their savings swell due to reduced spending on leisure activities and travel.

In the FCA’s latest Financial Lives Survey, 37% of adults reported an overall decrease in their household spending since the start of the pandemic1. The first few months of 2021 have therefore been a busy time for financial advisers.

“Covid has changed things,” said Francis Gill, founder of adviser Humboldt Financial. “As clients haven’t been able to spend as much, they have had more money to invest. “They are also looking for more financial stability in the medium term. So, I have had lots of enquiries about ISAs and pension funds.”

Here, we take a closer look at the main trends emerging as a result of this and other attitudinal shifts.

Putting health first

Living through a global health crisis has changed how we approach our own health – both today and tomorrow, with Opinium figures suggesting that loved ones’ future financial security has now become a priority for four in 10 (38%) consumers2.

“It’s easy to neglect your health when you’re busy and working a lot, but I think the pandemic has made people more conscious of their health and the need to protect their families,” said Paul Fynes, an adviser at City Capital Financial Planning. “I have definitely noticed clients being more receptive to protection products such as life insurance, critical illness cover, and income protection.”

The focus on health has also increased demand for products such as private medical insurance (PMI). “I have noticed people becoming more open to PMI due to the impact Covid has had on NHS waiting lists,” said Julian Strauss, Senior Financial Planner at Bigmore Associates.

And at a corporate level, it has pushed employee wellbeing up the agenda too. “Organisations are now more concerned about promoting financial wellbeing. And are looking for products that allow them to protect employees’ physical and mental health,” Gill said.

Products such as Vitality’s Healthy Fee Saver, which rewards investors who look after their health with lower product charges, are therefore tipped to be a growing trend. “Clients like to think they are being rewarded for their efforts, so I think linking more positive behaviours with lower charges is a great thing,” Strauss added.

Tech take-up

It’s no secret that Covid restrictions have sent virtual meeting platform usage skyrocketing from pre-pandemic levels. According to Ofcom, the number of Zoom users in the UK shot up from 659,000 to 13 million between January and April 2020, while users of Microsoft Teams also more than doubled in number from three million to 6.5 million in the same timeframe3.

For financial advisers, swapping face-to-face client meetings for virtual chats has had some positive effects. “The situation has sped up the adoption of certain technologies, which should help us to work more efficiently,” Strauss said. “I conducted 28 virtual client meetings in the run up to the end of the tax year, which would never have been possible face to face.”

Having to allow consumers to manage their money remotely has also forced providers to update their processes. “Providers have loosened up the rules to allow clients to sign documents online, which has saved advisers and clients a lot of time and which I think will become normal practice,” Fynes said.

Advisers agree, however, that face-to-face contact with clients will remain important as restrictions ease. “There is definitely still a place for face-to-face meetings,” Fynes added. “They will just perhaps be once a year rather than every quarter, with Zoom-style meetings in between.”

Risk and reward

Recent research indicates that many investors have become more risk averse as a result of Covid. Opinium’s figures show that 61% of investors now want to take a “health over wealth” approach that involves targeting stable if slower growth.

“Older clients have suffered two really big hits in the last 12 years or so: the credit crunch and now Covid,” Fynes said. “So understandably, they tend to be more concerned about preservation.”

However, advisers are now seeing those with time on their hands regaining their appetite for risk. “When the pandemic first started, people were very nervous about investing, and were wanting to reduce risk,” Gill said. “Now, they are feeling more secure and I’m seeing people looking to take on a bit more risk as a result – maybe due to a sense of having survived such a difficult time.”

For Strauss, the ideal solution is therefore low-cost funds that will allow them to ride out market ups and downs without having their returns decimated by high management charges. “There’s a lot of evidence that it’s asset allocation rather than stock picking that drives profits long term,” Strauss said. “That’s why I’m a big fan of the VitalityInvest Risk Optimiser (VIRO) funds, which cater for different risk profiles by incorporating Vanguard index tracker funds and daily asset allocation monitoring.”

Going green

There’s little doubt the pandemic has boosted interest in environmental investments. In October 2020, Triodos Bank found that Covid-19 was motivating more than a fifth of investors (22%) to explore investing in ethical funds4.

And advisers are seeing more demand for ESG funds as a result. “We are getting a lot more enquiries about environmentally friendly investments,” Gill said. One of the reasons for their popularity is how resilient they have proven to the volatility of the last 12 months.

“The trend for environmental funds has been helped by their relative outperformance during the pandemic,” Strauss said. “They have been able to produce better returns because they naturally tend to have more exposure to the tech sector and less to traditional polluters such as oil companies, which have been hit hard by Covid.”

Not all investors are looking for green funds, though. “Environmental investing is definitely a growing area, but I wouldn’t say it is mainstream just yet,” Fynes said.

Find out more about how VitalityInvest can support the retirement and savings needs of your client.

1. Financial Lives 2020 survey: the impact of coronavirus, FCA, February 2021:
2. Financial security through Covid-19, Lansons and Opinium, November 2020:
3. UK’s internet usage surges to record levels, Ofcom, June 2020:
4. Covid-19 fuels demand for impact investments, Triodos Bank, October 2020:

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