Managing Volatility: What’s Ahead for Financial Services

January 29, 2021

We’re only a month into 2021, but already the year is taking shape for financial services. The stock market is on a retail-investor-fueled rollercoaster, with Redditors taking on short-sellers, creating unprecedented volatility. The pandemic and subsequent lockdown spurred a digital reckoning, forcing brands from large banks to small fintechs to quickly reevaluate how they interact and communicate with their customers, investors and employees. But last year also put into greater focus the need for personal finance support in tough economic conditions, and for the industry to act with purpose and empathy.

As we look at 2021, the Financial Services team at Ketchum has a clearer picture of the hurdles and opportunities the industry may face. Here’s what we’re watching for—and how to make sure you and your company are prepared when it comes to communications and marketing.

The personal finance revolution

After a tough year for many, personal finance is taking center stage in consumers’ lives. People are hungry for resources and tech to help them manage their finances, savings, investments and planning for the future. Even people who were able to save, invest or pay down debt are hunting for resources to stay on track. Fintech is rushing to keep up, providing money management tools and other technology that enables more seamless and transparent support.

What this means for your comms: 2021 is the year to empower people to take control of their finances, and financial services companies need to be upfront and accessible in providing resources and tools for all audiences. How can your brand best empower the new financially impacted consumer? Lean into educational resources and accessible experts.

The younger, tech-savvy investor

App-based and commission-free online trading coupled with ultimate boredom in lockdown is fueling the dramatic increase in retail investing and the euphoric stock market surge (GameStop Redditor momentum, much?). There are estimates that a record 10 million new brokerage accounts were opened just last year. Younger and more tech-savvy investors are the driving force, some even turning to social media platforms like TikTok and Reddit to trade investing advice. This is creating some backlash from the financial community and media—and now we’re seeing backlash to the backlash.

What this means for your comms: This new audience is hyper-engaged with capital markets and on the hunt for educational resources and content. The challenge for financial services firms will be to transition this audience from app investing to understanding and leveraging broader financial services for the long term. Financial institutions have to reposition the definition of “savings” to “investments.” Showing up in unexpected channels will connect and engage them, but building trust is key.

The line in the ESG sand

If a global disaster like the pandemic teaches us anything, businesses need to be prepared for large-scale disasters, and climate change is a global challenge we can’t ignore. So, while the ESG (environmental, social and governance) acronym may have been tossed around plenty in the last few years, 2021 will be the year firms can’t just talk the talk—they have to walk the walk. Many CEOs are jumping ahead of potential regulations; businesses of all types are being implored to disclose their plans to get to a net-zero emissions economy.

What this means for your comms: Purposeful transparency is the name of the game. Preempt disclosure requirements and avoid greenwashing by carefully tracking environmental impact, sustainability and social governance, reporting current data and long-term plans to boards, shareholders and customers. Provide an accountability or feedback loop with your customers and employees by answering questions, not just in earnings, but throughout the year. Leverage your executive team and make them the human voice of your ESG efforts.

The new regulatory order

As President Joe Biden embarks on his first 100 days in office, he’s busy filling his cabinet and naming appointees, and one of his early picks may have big implications for the financial world. Gary Gensler, named the new Securities and Exchange Commission (SEC) chairman, is a Wall Street veteran and former head of the Commodity Futures Trading Commission. He is known for building a tough regulatory framework and was a driver for post-financial-crisis enforcement. He has yet to be confirmed by the Senate, but likely will be soon, if Treasury Secretary Janet Yellen’s swift confirmation is any indication.

What this means for your comms: New regulations may be ahead, potentially focusing on additional disclosure requirements for things such as corporate governance, and new requirements for political contributions and climate-change efforts for public companies. Just like with ESG, preempt disclosure requirements by tracking data and championing transparency. Disclosure of good data may soon go from nice-to-have for investors to must-have for regulators, so start early to build reputation and get ahead of any new requirements.

The wild, wild west of SPACs

The Wall Street Journal said it best: “The hottest thing in finance is four letters long.” SPACs (special-purpose acquisition companies, also known as “black check companies,” an alternative to traditional IPOs) essentially gobble up private companies and quickly make them public—and they’re booming. There were double the number of SPACs in 2020 than in the year prior, and 2021 is shaping up to be much of the same.

What this means for your comms: The communications around SPACs are wildly different from IPOs. An IPO requires a quiet period that limits what a company and its executives can say about the business before the listing, whereas SPACs are moving at record pace while pitching their investment theses from the rooftops, some even putting investor presentations on YouTube. But companies still must be super cautious about litigation risks and keep an eye for future regulation around SPACs.

What hurdles or opportunities are your financial firm seeing ahead in 2021? Reach out!

Becca Cooper recently returned to Ketchum as SVP and managing director of Ketchum’s Financial & Professional Services. Based in New York, she is responsible for leading Ketchum’s team of Financial & Professional Services consultants across North America to deliver creative integrated communications designed to meet clients’ continually evolving needs.