New Year 2025: This time it will be different

New Year presents a solid opportunity for brokers and financial advisers to reach out to clients and reflect on whether their insurance and investment portfolios are needs- and risk-appropriate. You can view this period alongside the annual tax year end as times when your clients will probably be thinking about their business and personal finances, making it easier for you to engage with them on finance-related decision making.

Maximising client outreach

Getting off to a flying start in 2025 does not mean dropping your family and friends on Old Year’s Eve to kick-off an impromptu round of client Zoom calls; but it does require some planning and reflection to maximise client outreach and affirm your financial advice value proposition. Your first couple of weeks back in the office should, therefore, focus on activities outside of your scheduled client reviews including client-focused communications about year-end financial best practices. 

One excellent touchpoint is to remind your clients to update their personal information including critical details such as beneficiaries on life insurance policies, retirement funds and wills. You can frame this request in light of the disaster that arises when such information is absent or out of date. You could also reach out to your clients in an informal email to encourage them to set new financial goals and objectives for 2025. A simple exercise you could guide clients through is to revisit household assets and liabilities and give some thought on how they would like these items to evolve over the coming years. You know, the big questions over what to do with the family house as retirement draws near etc. 

To address another neglected year-end financial planning practice, you could offer to guide your clients through a household budget review. It sounds silly, but middle- to high-income households are notorious for ignoring this practice with the result many of your clients ‘carry’ unnecessary expenses year after year. If you can convert just R500 per month in wasteful expenditure into an insurance or investment ‘sale’ you will benefit both the client and your advice business. Before you dismiss this step out of hand, take a moment to go review your own December and January bank statements to identify subscription services you no longer require. 

Preparing for a client-facing review

A useful internal exercise might be to review each of your client’s portfolios for any glaring issues. There is no telling what a few minutes spent on quick reviews in the context of each client’s financial goals, risk tolerances and time horizons might reveal. Where necessary, you can reach out to clients to discuss potential adjustments to their portfolio to reflect current market conditions. The idea is to gain your clients’ trust by proactively reaching out to address potential financial planning shortcomings or investment portfolio misalignments before they become critical. 

Getting to grips with your clients’ needs is a great way for financial advisers to stand out in a crowded market; but figuring out what those needs are can be tricky. One useful activity is to frame your client interactions and relationship building with reference to insights from adviser-client survey publications, freely available online. 

For example, in its July-August 2024 survey of 2700 financial professionals, Natixis Investment Managers identifies top client concerns including whether their portfolios are protected during financial market downturns; how to ensure their retirement savings outpace inflation; how to preserve and pass on their wealth; and how to balance risk and return when cash yields are attractive, among others. 

“The sustainability of the [US equity] rally is at the top of client concerns, as 72% worldwide and 84% in North America say clients want to know if they are protected from a downturn,” the Natixis survey reveals. “And after two years of feeling the sting of rising prices, 67% of clients want to know what they have to do to outpace inflation.” This survey has a global focus, but concerns over the duration of bull markets and generating real returns will resonate with local clients too. 

Key risks influencing your clients

Your challenge goes beyond addressing clients’ concerns to ensuring the asset allocations and investment styles you recommend for them match their need- and risk-appetites. To assist in this process, you need to know about the key risks influencing your client’s insurance and investment decision making. From a financial markets perspective, you might advise your clients against trying to time the market or chase returns. 

The latter could prove difficult given the 20%-plus returns delivered by the US S&P 500 over 2023 and 2024; and the fact local asset managers are ‘talking up’ potential returns from the JSE for the coming 12-months. You will have to ensure that your clients maintain sensible exposure to asset classes, not holding too much cash on the sidelines, and not going ‘all in’ to avail of unrealistic equity market expectations. The Natixis survey offered a succinct explainer, as follows: 

“With the market rally continuing in markets across the globe, advisers say the number one thing investors need to beware of is their tendency to chase returns or their inclination to try to time the markets. On the upswing, that can mean taking on too much risk by over allocating to hot performing stocks. On the downside, that can mean jumping out of investments to avoid loss and missing potential rebounds, a behaviour that can be measured in fund flows after most market events.” 

US market commentators are banking on technology shares to power ahead this year; but that does not mean you can invest all of your clients’ funds offshore, or put all of their offshore funds into the so-called Magnificent Seven. For the uninformed, the Magnificent Seven consists of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. 

More advice for advisers

Advice for advisers is to help clients become comfortable with investing by ensuring they understand their risk appetite, capacity and tolerance and by reminding them of the long-term growth objectives of their retirement funding assets. Your approach will vary from one client to the next. You may, for example, have to help conservative clients to reduce their cash holdings by explaining that holding cash is not risk free, or restrain aggressive clients from taking on too much risk in equity and private markets. 

Another useful insight from the aforementioned survey, and something that you must be aware of during client interactions, is that your clients will have different expectations about the return potential from financial markets. Per the Natixis Investment Managers Global Survey of Individual Investors, conducted in 2023 across 8500 investors and 23 countries, investors expected their investments to earn 12.8% above inflation over the long-term. A similar survey of professional advisers suggested a more realistic real return at around 8%. Wow; your writer thought South African advisers and investors had high hopes. 

Getting the most from each client interaction

The message from today’s newsletter is to leverage the New Year to create more opportunities to interact with and establish those all-important trust relationships with your clients. Remember, the start of the year inspires individuals to reassess their life goals, including financial aspirations, meaning that your clients may be more open to discussing financial planning and making positive changes. As a parting thought, this piece was quite investment centric; you should of course ensure that your interactions span other aspects of financial planning such as estate planning and life risk protection. 

Writer’s thoughts:

Using the New Year period to proactively engage with your clients can set the tone for a successful financial planning year. What are you doing to strengthen client relationships as 2025 gets underway? Please comment below, interact with us on X at @fanews_online or email us your thoughts editor@fanews.co.za.