Nine in 10 financial advisers are helping clients to increase their equities exposure because they don’t believe cash returns will deliver what they need if interest rates fall.
The survey of 300 UK advisers by Wesleyan, also found that 43 per cent of clients were concerned that increasing equity exposure would mean taking more risk, while 41 per cent were worried about market volatility.
Nich Henshaw, head of intermediary distribution at Wesleyan, said: “The scale and speed of future rate reductions is far from certain, as external headwinds beyond just the rate of UK inflation are still in play.
“A rate cut, when it comes, could weaken the case for some clients holding cash, and it’s clear advisers are recognising and acting on this. But advisers also know monetary policy is just one factor to consider when determining asset allocation.”
When asked how advisers were helping those clients who are anxious to increase their exposure, 45 per cent said they had started or increased investments in a smoothed fund.
Some 43 per cent were increasing the frequency of client meetings to discuss any concerns, while 37 per cent said they were using cashflow modelling tools to show the potential benefits of increased equity exposure.
“Smoothed funds can provide a middle ground for clients who are looking to reduce their cash allocation as they re-engage with equities.
“These funds invest across a diversified range of asset classes and employ an actuarial mechanism where, during times of strong fund performance, some returns are held back.
"These are then re-distributed during periods of weaker fund performance, reducing volatility and helping to moderate risk,” Henshaw added.
alina.khan@ft.com
