Wealth transfer worries are among advisers’ top concerns

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The Schroders Financial Adviser Survey can always be relied upon to provide some fascinating insights about the advice community and their clients. This May’s iteration, completed by 225 advisers, was no exception. With data providing some hidden gems along with responses that were helpful in confirming our assumptions.

The subject of wealth transfer continues to provide particular food for thought. Fifty four per cent of advisers are now concerned that their business could lose assets when money passes between partners and to younger generations upon inheritance. However, we continue to observe a lack of strategy for advising younger clients and only 11% of advisers have a strategy for retaining, attracting and advising women.

As 60% wealth in the UK will be in the hands of women by 2025 due largely to the baby boomer generation passing wealth from a husband to a wife, this is a challenge which we believe advisers cannot ignore. This is a real threat as a large proportion of widows choose to leave the advisers used by their husbands when they inherit.

A big swing towards bearish sentiment was not a major surprise. Fifty-seven per cent of advisers indicated that their clients are now bearish. This compares with only 12% in our last survey conducted in November last year, prior to the Russia/Ukraine conflict and when positivity around the ‘end of the pandemic’ and vaccine efficacy was high. Correspondingly, back in November, 41% of advisers said that their clients were bullish, while only 7% now do.

Capital loss is the issue that concerns most clients followed by rising inflation. Nearly 70% of advisers also expect that some clients will have to adjust their investment plans as a result of the cost of living crisis. We would argue that this makes a strong case for the value of ongoing advice as advisers work though these challenges with their clients, adapting plans appropriately.

Eighty-five per cent of advisers are expecting interest rates to trend higher over the next five years and  although 65% anticipate higher inflation, this is down from 75% in November perhaps reflecting concerns over a recession.

Sustainable investing remains in focus with a significant 90% of advisers agreeing that events over the last two years have reinforced the importance of stewardship and using an asset manager who actively engages with company management. At Schroders we believe that it’s important for asset managers to not only demonstrate a high level of stewardship and engagement but also show the changes this is driving.

Over the last few years, we have also spotted an increasing focus on the ‘s’ and the ‘g’ factors of ESG (social and governance) and a greater understanding of the interplay between these and environmental factors. The number of advisers explicitly considering these within their fund selection process is now at an all-time high of 90% – perhaps ESG is now becoming mainstream?

Seventy one per cent of advisers also report that they are preparing for the anticipated changes in regulation which will see them having to discuss suitability preferences with clients.

We also observe this shift across our model portfolio range where the percentage of flows into the sustainable models continues to increase month on month and our new adviser guide to net-zero has been extremely popular.

Finally, outsourcing portfolio management remains high on the agenda for many advisers with 17% indicating that their use of this had increased during the last year. In particular, those outsourcing more than 50% of client assets has increased from 21% to 31% since November last year.

Access to investment expertise and resources remain the key reasons for this, followed by effective volatility management and delivering more time to spend with clients. Given recent market conditions, this is unsurprising as advisers engage with their clients discussing the impact on their investments.

Schroders Intermediary Solutions director Gillian Hepburn 

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