One in four advisers ready to dump managed funds

Mike Taylor

Managing Editor and Publisher

21 October 2022

One in four financial advisers are prepared to dump fund managers as they turn significantly more conservative with respect to their expectations of stock market returns over the next 12 months, according to the latest research from Investment Trends.

The bottom line is that cash, term deposits and other fixed income products have leapt to the fore.

The Investment Trends 2022 Adviser Product and Marketing Needs Report has revealed that advisers expect only an average of 0.7% capital growth over the next 12 months, down from 3.5% a year ago.

It found that while diversification continued to be the top priority when selecting investments for clients (cited by 68% of advisers), they were highly attuned to economic conditions and were significantly more likely to prioritise liquidity, protection and high-yield products.

The research identified that one every two advisers were significantly conscious of the current economic conditions in terms of client portfolio construction.

Commenting on the research, Investment Trends Research Director, Dougal Guild said that with interest rates on the rise, the proportion of new client money going into Cash, Term Deposits and other fixed income products increased by 43% this year, the highest it had been for some time.

The research further revealed that advisers are starting to allocate more new client money to managed accounts and ETFs, both looking set to continue growing based on advisers’ intentions.

It said the higher allocation to both these groups comes at the expense of managed funds, whose share of flows has reduced to 36% in 2022, a drop from 45% in 2021. One in four advisers say they intend to stop using a fund manager in the next twelve months. Of those contemplating leaving, performance and lack of confidence are the primary drivers, however, 43% mention shortcomings around customer service or communication.

“Although poor performance and a lack of confidence are key drivers of attrition for fund managers, advisers have indicated their preference for reliable customer service and impactful communication, making it an important priority for providers to pro-actively engage with their clients to help solidify user loyalty,” added Guild.

The study also found that advisers are increasingly dedicating significant time to researching and are calling for wide-ranging information from product providers, including content about market updates, outlook for the economy, and in recent years, information about the impact of regulatory changes. When it comes to collateral for client education, newsletters, infographics, and news articles are the preferred artefacts, however, demand for social media content is on the rise for end-client education.

“There are significant opportunities for providers to support advisers more by providing research and education to free up some of their time and increase engagement,” said Guild.