Markets have performed much better in recent months than was the case in 2022 and interest rates are believed to be peaking, but sentiment among advisers and their clients remains very mixed.
In the latest Professional Adviser Digital Working Lunch, Schroders' intermediary solutions director Gillian Hepburn and investment director Olivia Geldenhuys used the findings of the firm's latest UK Financial Adviser Pulse Survey to shed some light on exactly where things stand. They were joined by Unique Financial Planning's managing director, Philip Martin.
The survey took in responses from 180 UK advisers during the first half of May.
Schroders found 44% of advisers believe sentiment among their clients remains bearish, a notable improvement on the November 2022 survey when 68% of advisers said their clients were on the bearish side.
Few have switched to being bulls though, with 44% of advisers' clients now neutral, up from 26% in November. Just 12% of clients are now bullish, the participating advisers said, up from 7% in the last survey.
"I think this is really quite understandable if we think about how much volatility is present in the market at the moment and how much things are moving around," Geldenhuys said. "Advisers may be seeing clients who really don't know what to do, so sitting in that more neutral space, I think is quite an interesting position."
Geldenhuys noted that the biggest worry cited by clients was capital loss.
Another notable finding of the report Geldenhuys highlighted was 90% of advisers said they have been having conversations with clients about the merits of long-term investing versus just holding cash deposits.
The cost of living was also a topic on the mind of advisers and their clients, the survey found.
"The cost of living crisis is really starting to bite, and we are starting to see that clients are tending to need to adjust their plans accordingly," Geldenhuys said.
The Consumer Duty deadline was of course front of mind for advisers, with only 19% saying they are fully prepared, while 77% said their preparations are still in progress. 4% have not started preparing at all.
Turning to economic and market expectations, the Adviser Pulse found 31% of participants expect equity market returns to be lower than average over the next five years, while 80% said they expect inflation will trend lower over the next five years. The majority expect interest rates to follow suit.
"People are hoping that interest rates and inflation will come down, but it's a challenging time for advisers and we haven't got a crystal ball on all of this," Hepburn said.
Disruption related to technical advances was also picked out by Hepburn and Geldenhuys as a major theme that advisers and their clients are paying attention to.
