The 2024 Schroders UK Financial Adviser Pulse Survey published today found that market optimism is now at its highest level since 2021, with clients looking to embrace risk by returning to invest in markets.
The survey, which is a temperature check on the challenges and opportunities faced by advisers and their clients, found that 49% of advisers reported that their clients, who have been holding cash over the past few years, are now more likely to consider returning to investment markets or have already invested.
The results of the survey also revealed that 41% of advisers have reported that their clients are now bullish compared with only 17% in November 2023. Furthermore, the number of advisers who are reporting that their clients are bearish has fallen from 61% to 10%. This is the strongest balance of sentiment since May 2021 when market optimism surged as economies started to recover from the initial impact of the Covid-19 pandemic and first lockdown.
Although the survey finds that clients continue to report capital loss as their key concern, this has dropped from a peak of 63% in November 2022 to 47%, a further demonstration of confidence returning in markets.
This sentiment is also supported by advisers’ expectation of growth over the next five years; 69% of advisers are expecting higher global growth (an increase from 53% in November 2023). This proportion stood at just 30% in May 2022.
With the UK General Election on the horizon, the Survey – conducted between 25 April and 8 May 2024, across a sample of 276 advisers – found that almost three-quarters of advisers (74%) reported that clients are asking about what impact a potential change in UK Government will have on their finances.
Sustainability
The survey finds that 26% of advisers reported a decrease in clients seeking sustainable investment solutions – roughly in line with the November figure – whilst those reporting an increase has changed from 28% to 18%, having steadily decreased from 75% in November 2021.
The survey further reveals that the changing client appetite for sustainable investment solutions comes as a result of perceived performance challenges (61% v 49% in May 2023), followed by increased scepticism (74% v 37% in May 2023).
Whilst 50% of advisers reported as feeling prepared for the introduction of Sustainable Disclosure Requirements (SDR) labelling, clearly there is more work to be done to provide education and support. Moreover, 33% of advisers at this stage don’t know which sustainability investment label will have the broadest appeal to their clients which is not surprising.
Consumer Duty
Advisers are still focused on implementing Consumer Duty and continue to flag that this is having an impact on their business.
In November 2023, the Schroders UK Financial Adviser Survey found a significant swing with 41% of advisers identifying that Consumer Duty will have a high or reasonably high impact on their business, compared with 25% before the rules came into effect. This now appears to be reducing marginally to 39%, though clearly implementation is still impacting their businesses.
The ongoing assessment of fair value using client feedback remains the key priority in 2024 for advisers.
The survey has also identified an increase in advisers considering the management of vulnerable clients as a priority, with 16% now stating this to be their first priority for the ongoing implementation of consumer duty compared to 9% in November 2023. However, the majority of advisers (63%) only identify less than 10% of clients as falling into the vulnerable category. In reality, the number could be significantly higher, with a recent report[1] suggesting that 17% of customers in the UK identify themselves as vulnerable, and when assessed against the FCA’s criteria, as many as 67% could potentially fall into this category.
Further Regulation
Retirement Income Review: The Schroders Adviser Pulse Survey finds that 67% of advisers have reviewed their retirement income proposition as a result of the FCA thematic review of Retirement Income Advice. Specifically, the key areas they are focusing on are the ongoing service proposition, assessing capacity for loss and the investment proposition (in that order).
Advice/Guidance Boundary: The survey shows 45% of advisers are considering a new proposition for some of their clients or new clients as a result of the advice/guidance proposals. This may be related to the ongoing opportunities which wealth transfer to the next generation could deliver.
Lifetime Allowance changes: 92% of advisers have some clients who have been affected by the changes to the Lifetime Allowance, with 74% indicating that this applies to up to 25% of their client base – indicative of the typical age profile and wealth of advised clients.
Just under a quarter (24%) of advisers feel that they haven’t been given enough support/information to manage the change in the Lifetime Allowance.
British ISA: In Spring 2024, the UK Government announced plans to launch a new ISA called the ‘UK ISA’, sometimes also reffered to as the British ISA, which would enable an additional £5,000 allowance to be invested in UK Companies on top of the existing £20,000 across other types of ISAs. This is likely to launch in late 2024 or early 2025. When asked in the Pulse Survey, 80% of advisers responded that they would consider recommending the British ISA if introduced.
Artificial Intelligence
More than half (57%) of advisers anticipate higher disruption related to technological advances which is an increase from only 30% in November 2022. This is likely to be the continual focus on AI technology such as ChatGPT.
The percentage of advisers who consider the development of this technology as an opportunity continues to rise to 76%, and the number intending to incorporate this into their advice process in the next year has risen to nearly 20% from 8% in May 2023.
James Rainbow, Head of UK at Schroders, commented:
“I am delighted to see evidence that clients are growing increasingly confident after a challenging few years. This positive trend reflects what we are seeing, both at a macro level as inflation falls and economic growth returns, but also across our industry. As we continue to navigate the ever-changing financial landscape, we remain committed to providing the necessary tools, insights and support to help advisers capitalise on these opportunities and drive long-term success for their clients.”
Gillian Hepburn, Commercial Director at Benchmark, also commented:
“Whilst our November Adviser Survey indicated that advisers feel the Consumer Duty Fair Value Outcome will put pressure on the nature of the ongoing charging structure, this Pulse Survey highlights some of the areas where advisers are proactively delivering value beyond the annual review cycle. Whether it’s providing guidance related to regulatory change or the potential impact of a change in government, discussing whether to invest or stay in cash, or reshaping a portfolio to meet a new client need, such as helping to support family with the cost-of-living crisis, there are often several touch points through the year where an adviser will take action to help to ensure that a client remains on track to achieve the best outcomes for their evolving needs.”
