Alejandro M. Pascual, CFP®, director of Oriental Financial Services offered an orientation talk for Oriental clients where he explained the current situation of the financial market and presented some of the market trends in general.
Broadly speaking, the year 2022 was a somewhat complicated one for the United States economy and subsequently for the economy of Puerto Rico, since both jurisdictions have been affected by inflation. At the beginning of the pandemic in 2020, the closure or lockdown affected large and small businesses alike, but subsequently the situation has continued to complicate with inflation, the rise in interest rates, the high costs of acquiring products, and operational expenses and the decrease in consumption. Also in 2022, the war between Russia and Ukraine began, which has also affected the cost of fuel as well as the production chain.
Although inflation has been decreasing in 2023, it is currently at 5.1% compared to last year when it was 7.2%, it is still at high levels. The average historical inflation rate, from 1985 to 2019, has been 1.8%.
The financial sector has also been affected by high interest rates since an increase in rates results in a decrease in the acquisition of various types of loans. The stock market has also seen a decline, since many investors are scared by the economic situation and stop investing in the stock market and prefer to invest in bonds. Although this year we have seen a recovery in the purchase of shares, it is still observed that investors continue to bet on short-term bonds since the yield of short-term bonds at this time is higher than the yield of long-term bonds.
Regarding the trends that currently exist in the market, there are three main aspects: the regulatory aspect, the consumer behavior aspect and the technological advances aspect.
The regulatory aspect is aimed at strengthening fiduciary regulations, due to this, these regulations seek to: prioritize the best interests of clients when recommending investment products, mitigate conflicts of interest that may exist and greater transparency and better accountability .
The U.S. Department of Labor’s PTE 2020-02 has established a new fiduciary standard for providing retirement advice, protecting those saving for retirement from potential conflicts of interest by salespeople and financial advisors, and further establishing an emphasis on transparency and ensures better protections for investors.
In the goods market in general, both in the financial sector and in retail and other markets, we see a marked tendency towards individualism. Consumers seek personalized experiences that meet their unique preferences, needs and interests which is made possible through the collection, analysis of customer information and data.
Offering an individualized experience, product or service improves customer satisfaction, commitment and loyalty to the company or person offering the experience.
In the financial market, this trend is no exception; the client seeks customized indexed investment solutions, according to their taste, needs and specific situations. Companies that successfully embrace personalization gain a competitive advantage by delivering more relevant and meaningful experiences to their customers.
The technological advance aspect points to a boom in the use of artificial intelligence (AI). The use of AI can be extremely beneficial for companies since it allows improving the customer experience by automating and personalizing the service, generating information from the data obtained about the customer, promoting the understanding of customer preferences, automating repetitive tasks, process optimization and predictive analysis of customer trends.
Providing and utilizing customer preference analysis will provide personalized experiences, leading to greater customer satisfaction and loyalty.
