Brexit & geopolitics remain key concerns but UK equity allocations to rise in 2019
Schroders is today announcing the findings of its annual Adviser Survey 2018 [i]. Among a number of interesting results, 89% of advisers believe that Brexit is a key concern for clients and 34% believe geopolitics is a key concern. Less than 7% of advisers believe that inflation is currently a key concern for clients, down from 21% in 2017.
The survey was undertaken earlier this month with 400 advisers from across the UK. In addition to clients’ concerns, it covered a range of topics including changes in asset allocation and attitudes towards the Pensions Freedoms.
Philip Middleton, Head of UK Intermediary, Schroders, commented:
“Our annual adviser survey shows that clients have reduced their exposure to UK assets in 2018 and have seemed more risk adverse due to Brexit and other geopolitical concerns, but advisers are expecting allocations to UK equities to rise again in 2019.“
Clients’ biggest concerns for the next 12 months – Brexit
Clients’ geopolitical risk concerns translated into a more cautious approach with 70% prepared to take less risk. Just over a third (35%) of clients have moved some assets out of the UK or are considering doing so in 2018, compared to 21% in 2017. In 2018, 74% of clients who have moved money out of the UK have purchased US assets, compared to 22% in 2017. Allocations into Europe have remained relatively flat (52% in 2018 compared to 50% in 2017), however both Asia (ex Japan) and Emerging Markets featured strongly in terms of the reallocation of assets.
Brexit – Where has money that has moved out of UK assets gone?
How have your clients’ portfolios changed in terms of asset allocation in the last 12 months?
There has been a reduced allocation to UK equities and bonds and an increased allocation to developed international equities and cash.
How do you expect to change client portfolio asset allocation over the next 12 months?
Equities remain the preferred asset class with an increase in UK allocations expected.
Minimum asset size
The survey asked advisers if they had a minimum asset size for new clients. While 55% of advisers do not have a minimum asset size for new clients, only 1% have an average client size of less than £50k.
Clients’ concerns relating to pensions remained similar to 2017, with ‘running out of money for retirement/how long they live for’ remaining the greatest concern (67%), a slight decrease from 70% in 2017.
Almost three-quarters (73%) of advisers believe that their clients now understand the Pension Freedoms and 81% of advisers believe they have had a positive impact on their business.
The survey showed a minimal change in allocations to passive management. While there was a small uptick in the percentage of advisers using passive (68% vs 66% in 2017), most advisers make relatively sparing use of them, with 79% of advisers allocating less than 25% of clients’ assets to passive investments.
[i] The survey covers 400 advisers from across the UK, with whom Schroders have a proactive investment-focused relationship.
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