The responses we received to our latest Schroder Adviser Survey provide a degree of reassurance that the views of advisers and their clients are much as you might expect in many areas.
But, as always, there are also areas that reveal more unexpected and thought-provoking opinions.
Let’s first look at the findings you might expect.
Cash discussions: As the cash versus investing debate continues, 95% of advisers are having conversations around the topic. The question of ‘should I invest in cash?’ is not straightforward and this is an area where advisers can provide real value to clients.
Talking through the issues, they can help to ensure clients’ money is deployed in the right place to meet their long-term goals and that clients do not miss out on potential opportunities as markets rebound.
Clients of 35% of advisers have stopped or reduced pension contributions
We have crunched the numbers, reviewing historic returns on cash and stock market investments over a range of timeframes extracted from 96 years’ data. This shows the likelihood of cash savings beating inflation has been about 60:40 for the majority of all timeframes. In contrast, for every 20-year timeframe in the past 96 years, equities have delivered inflation-beating returns.
Preserving capital: Advised clients continue to identify capital preservation as their key financial priority and have less of a focus on inflation and interest rates. Many advised clients are in or near retirement, the stage in life when preserving a pension pot and other assets to fund later life is of particular importance. As many are likely to be mortgage free it makes sense that interest rates are seen as less of a concern.
Cost-of-living crisis: Almost 90% of advisers have adjusted some clients’ plans due to the cost-of-living crisis. The key reason is rising household expenses. Clients of 35% of advisers have stopped or reduced pension contributions.
The number of advisers who think Consumer Duty will have a high impact on their business has risen from 25% to 41% since May
This is a concern and advisers can again add significant value through ensuring clients understand the long-term impact of making changes to their pension contributions and helping them generate additional income where needed in the most tax efficient way.
For those clients adjusting plans to help their wider family, considerations as to whether these are gifts or loans is another area that might need careful financial advice.
Now let’s take a look at some of the more unexpected revelations.
Consumer Duty: The number of advisers who think this will have a high impact on their business has risen from 25% to 41% since May. The May survey was completed prior to the implementation deadline and clearly the work required to comply with the Duty has resulted in a change of view.
The number of advisers charging between 0.5% and 0.75% on an ongoing basis has sharply increased from 37% to 53%
Most advisers also indicated the key priority for them for the continual implementation of the Duty in 2024 will be the ongoing assessment of fair value using customer feedback. I think the summary here is the implementation of Consumer Duty is about evolution, not revolution.
Adviser fees: 44% of advisers feel a downward pressure on fees, yet the number of advisers charging between 0.5% and 0.75% on an ongoing basis has sharply increased from 37% to 53%. This has been at the expense of those charging less than 0.5%, so we are not really seeing this pressure translate into change.
69% (an increase of 10% since May) also indicated Consumer Duty would put pressure on the ongoing advice charging model. We are starting to see some subscription models and hybrid models emerge in this area, so this is definitely one to review over the next few years.
Wealth transfer: The landscape here continues to be challenging and despite the many articles, webinars and conference presentations on this topic, 84% of advisers still have no strategy for younger clients.
A whopping 90% of advisers have no strategy for advising or retaining women
The number of advisers prepared to advise clients with less than £50,000 to invest has reduced to an all-time low of only 25% (from 52% back in 2019). Perhaps the proposed advice/guidance boundaries work being undertaken by the Financial Conduct Authority will help to address this?
A whopping 90% of advisers also have no strategy for advising or retaining women. A separate survey by Schroders recently indicated that only 34% of widows currently inheriting wealth will remain with the adviser – and with the current lateral transfer of wealth in the baby boomer generation, this pattern of behaviour could become a challenge for some advice firms.
Artificial intelligence: It’s probably no surprise this is now firmly on the radar for many advice firms but perhaps the pace of change is more unexpected. 70% of advisers now think artificial intelligence technology such as Chat GPT presents an opportunity for their business – a significant rise from 57% in May.
73% also believe they will implement this in some way into their advice process in the next five years, with 17% of those believing this can be achieved in the next year. The key area they believe this would be helpful would be to increase efficiency and automation, so this will definitely be one to watch in 2024.
Gillian Hepburn is commercial director at Benchmark
