Personal Finances in Unpredictable Times

Since the coronavirus pandemic began taking hold in early 2020, global stock markets have taken investors on a rollercoaster ride, with aggressive climbs in value, precipitous drops and an overall queasy feeling in the pits of our stomachs about what's next.

COVID-19's impact on personal investments

Millions globally have been affected financially during the pandemic, and in very different ways. While savings may have resulted from changes in lifestyle and working from home, online spending has increased dramatically. Millions of people lost their jobs and dipped into their retirement accounts. Under the CARES Act, which went into effect during the pandemic, investors were permitted to withdraw money from their retirement funds in 2020 only without paying the 10% early withdrawal penalty - and they did so in record numbers.

A third group of investors and retirees chose to avoid making any investment decisions, believing that the safe move was to not focus on the stock market's wild ride. This "bunker mentality," however, may have put them at greater long-term risk by not taking advantage of opportunistic financial management solutions.

What is driving these different behaviors - particularly investors unwilling to make financial moves in such times of stress and volatility? According to a recent Forrester study*, underlying investor inertia is a lack of understanding regarding different types of investment accounts: Consumer involvement in wealth management options offered through insurers and other financial institutions depends in large part on their comfort with financial concepts. Many are unfamiliar with how different wealth management options work and which are best for them. Moreover, due to the pandemic, call centers have longer wait times, leaving many without the resources to make smart decisions on their own.

Digital engagement and education: Key to meeting financial goals

According to Meera Krishnamurthy, Cognizant's Global Head of Insurance, addressing a lack of financial education is being solved with digital solutions. "Utilizing predictive data analytics, insurers and financial institutions can offer personalized content that is streamed directly to their customers' dashboards and emails, advising them on opportunities that will help them reach their financial goals," Krishnamurthy said.

Technology companies like Cognizant are helping insurers and financial institutions directly engage their customers during the pandemic. Using Cognizant's Personalized Interactive Video solution, one global group insurance provider saw a 45% increase in portal registration for new members, and, at the same time, a significant drop in call center activity, indicating that the online self-service tools and information was meeting customers' expectations.

"There's no benefit to social distancing from financial markets," Krishnamurthy continued. "Insurers are helping plan participants, members and policyholders take control of their financial future through direct virtual client engagement - including easy-to-understand videos that guide them through the details of their coverage and educate them on how to best use 24x7 online app self-service features."

Smart investing driven by smarter fintech

As the opportunity and demand for personalized, digitized services grow, insurers and financial institutions are rapidly adopting new tools, such as account aggregation, personalized content delivery and accountability triggers. By partnering with technology solutions companies like Cognizant, insurers and financial institutions are delivering personalized wealth management coaching to their clients that is backstopped by powerful data analytics tools, predictive analytics and machine learning.

Financial goals for various age groups naturally differ, and those goals may have changed during the pandemic. Millennials tend to be concerned with paying down debt or saving for a down payment on a home, while Gen X and Baby Boomers generally focus on saving for retirement and investing in education planning via 529 accounts. Yet with the help of digital technology, businesses offering wealth management solutions can better understand their individual investors' needs and create targeted messaging that accounts for what is in the best interest of plan participants.

Now, the opportunity to merge the benefit of interpersonal wealth management, the ease of making investment changes online, and the knowledge on how to best benefit from both is arriving. With a modern form of personalized digital engagement, investors are becoming more empowered through their knowledge and ability to act on that information.

"As we look toward 2021, we expect the digital acceleration that was brought on by the pandemic to continue," says Cognizant's Krishnamurthy. "Insurers and retirement services companies will provide the personalized tools and the ease with which to access those tools to empower plan participants and members to take charge of their financial wellness."