The Financial Conduct Authority wants to create a culture of retail investing, with well-informed consumers putting their money to work to achieve better returns and support economic growth.
This is a hard message to land given the market volatility of recent weeks. The performance of global equities following the announcement of new tariffs on US imports has dominated the front pages, and advisers have once again had to reassure clients not to make rash decisions with their investments.
Here, smoothed funds really come into their own, providing stability for the more risk averse investor.
They use smoothing mechanism to calculate and hold back a portion of returns when assets outperform, using those laid-away returns to support the fund’s value during more challenging periods.
Overcoming short-term volatility is exactly what smoothed funds are designed for, and it is a big part of their appeal for advisers. But beyond this, they can also be a powerful tool for advisers building a suitable portfolio of investments for clients of every type.
As regulations evolve and clients’ financial needs become more complex, the applications of smoothed funds will continue to expand.
Our recent white paper, Smoothing the Way, written in partnership with the Lang Cat, dug into advisers’ perceptions of smoothed funds.
Advisers prove the value of advice by helping clients to make informed decisions around risk
The benefits of smoothed funds, according to our research, include managing volatility and predictability of returns, but also their ability to help advisers to address clients’ behavioural biases and avoid having panicked conversations with clients.
As such, smoothed funds seem tailor-made for times like these, when we too often see investors give into risk-averse instincts and divest prematurely to protect themselves, when it is not actually in their best interest to do so.
Advisers prove the value of advice by helping clients to make informed decisions around risk and make sure that their actions – particularly in the throes of a downturn – support their long-term goals, which typically means time in the market.
Because we know that volatility – however uncomfortable it may be to live through – is not the same as risk. And we also understand that ‘predictable volatility’, as FCA Chief Executive Nikhil Rathi describes it, is here to stay.
This is part of the reason why smoothed funds can also support advisers’ compliance with Consumer Duty.
These rules lay out ‘higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first’ .
So, given their inherent ability to help ride out the market disruption we have seen in 2025, smoothed funds can help advisers deliver suitable outcomes for their clients and address issues that risk causing consumer harm.
Consumer Duty also comes in the wake of the FCA’s thematic review of retirement income advice, which found that many advisers were not taking account of the needs of their customers in decumulation.
Smoothed funds can be an ideal tool for funding long-term care
At sensitive times like these, smoothed funds can help provide a steady income stream to support a client’s retirement lifestyle.
And they can be especially important for clients with complex financial needs, where certainty and peace of mind are paramount.
Smoothed funds can be an ideal tool for funding long-term care, for example.
And they can provide a sustainable income through times when clients are experiencing upheaval in their personal circumstances, perhaps because of a bereavement, divorce or illness.
But smoothed funds are a versatile option that can be equally suitable for clients taking their first step into equity investing, acting as an entry-level product to help them build their appetite for risk.
Investing in a smoothed, managed fund can help also clients achieve better returns than sitting on cash, building their confidence so they are less inclined to follow the herd mentality – a valuable lesson as they start on their investment journey.
And they’re easier to access than ever before. A new generation of smoothed funds, including the Wesleyan With Profits Growth Fund, now sit on independent platforms, allowing advisers to easily integrate funds into existing client portfolios.
While you can never guarantee completely smooth sailing, a smoothed fund can help your client weather the worst of any storms that lay ahead.
James Tothill is investment specialist at Wesleyan
