One of the highlights of my year is the Schroders Adviser Annual Survey - what questions to ask? Will anyone respond? Will it just confirm what we already know or will it unearth some hidden gems?
This year hasn't disappointed and with nearly 440 advisers expressing their views, there's plenty to analyse and debate.
For me, the key responses fall into 3 categories:
- Confirmation: we could have guessed the response but it's great to quantify this
- Contradictions: sometimes things don't quite add up!
- Challenges: what are they and why?
Let's take a closer look.
1. Swing further to bearish: client sentiment has worsened. 68% of advisers now describe their clients as bearish or very bearish. A significant change from November last year when this was only 12% due to the efficacy of the Covid vaccinations and prior to the Russian invasion of Ukraine.
2. Impact of the cost of living crisis: in May, 69% of advisers indicated that some clients would have to adjust their investment plans as a result of the cost of living crisis. This has now translated into 53% reporting that some clients have made adjustments. We expect this to rise further as the winter turns colder pushing up fuel costs and more homeowners face the end of their current fixed rate mortgage.
3. Outsourcing: based on our own experience, it's not surprising that the number of advisers outsourcing some or all of their investment proposition continues to increase. As a provider of investment solutions, the expectations of 23% of advisers to increase allocation to multi-asset funds and 21% to model portfolio services is welcome!
1. Sustainability: the level of confidence for advisers when discussing sustainability with clients has reduced, which given that the proposed regulation on product labelling was announced around the time of the survey is hardly surprising. However, only 40% want more educational support.
2. Deeper client discussions: the survey indicated some challenges for clients in terms of their values when it comes to sustainability. 53% of advisers noted that discussions on fossil fuels and impact on energy prices were taking place as were the inclusion/exclusion of armaments in relation to the war in Ukraine. Sometimes investing sustainably isn't clear cut?
3. Move to cash: despite encouraging clients to invest over the long term, the increased allocation to cash for a significant number of advisers was perhaps surprising - particularly in view of rising inflation? However, there was an indication that next year, increased allocations would be made to equities.
1. Regulation: as ever, regulation was the top cited challenge for the majority of advisers. With The Consumer Duty and sustainable product labelling on the horizon, it's no real surprise that this continues to concern advisers.
2. It's not PI!! PI cover is usually cited as the second highest challenge for advisers, however concerns about this have fallen considerably. I spotted a recent tweet from an adviser indicating that turnover had doubled and he also had recruited another adviser, yet PI costs had remained the same. Perhaps there is a genuine change in the PI market - or could fewer DB transfers be the cause?
3. Wealth transfer: 59% of advisers are now concerned that their business could lose assets as wealth transfers between the generations. However, the stats don't indicate significant change in terms of targeting the next generation. The rise in the average age of client banks and the decreasing focus on clients with less than £50k to invest doesn't suggest much activity. Only 26% of advisers have a proposition for the next generation of their clients. Moreover, with studies indicating that 60% of the wealth in the UK will be in female hands by 2023 due to baby boomer transfers to widows, it's surprising to note that only 5% of advisers focus on retaining and attracting these women. A challenge for some but opportunity for others!
Find out more
Read the full survey results and download a copy of our adviser report here. To find out more about how Schroders can support you, visit schroders.com/investment-solutions, contact your usual Schroders' representative or call our Business Development Desk on 0207 658 3894.
This post is funded by Schroders