Investments  

Third believe stagnant growth will be biggest investment challenge

According to the latest Barings investment barometer – which explores attitudes towards the current economic environment and major asset classes – 31 per cent of advisers hold this view, which is up 11 per cent since the research was conducted in September last year.

The barometer also highlights that the number of intermediaries predicting that the UK will experience inflation over the next three years has increased to 55 per cent, up by 12 per cent from three months ago.

Barings said that unsurprisingly, four fifths (80 per cent) of financial advisers stated that their clients were concerned about the impact that this would have on their cash investments.

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The biggest falls in concern were in relation to the eurozone crisis and slowing growth in China, decreasing by 12 per cent - down from 89 per cent to 77 per cent -and 16 per cent - down from 53 per cent to 37 per cent - respectively.

Rod Aldridge, head of UK retail distribution at Barings, said: “As we enter 2013, macro-economic concerns continue to be at the forefront of financial advisers’ minds, with the UK economy proving one of the biggest challenges. This is understandable, with economic predictions suggesting that the year ahead could be testing. In October the International Monetary Fund suggested a sombre outlook with the European economy ex-UK barely expected to grow at all with just 0.2 per cent growth forecast over 2013. The UK economy is expected to do slightly better at 1.1 per cent, but this is still far lower than we would like.”

The research has revealed that managing market volatility is key in the current markets, and diversification of assets remains the most popular method of doing this, favoured by 71 per cent of intermediaries.

There has been a significant increase in the number of advisers looking to identify growth opportunities, up 11 per cent since September from 38 per cent to 49 per cent.

Other strategies preferred by financial advisers include encouraging more regular reviews of investment portfolios - up by 7 per cent from 47 per cent to 54 per cent - while just over one quarter of financial advisers (28 per cent) are looking to multi-asset products to manage volatility.

ADVISER COMMENT

Jason Witcombe, director of Evolve Financial Planning, said: “For us, what often drives enquiries from new potential clients is greed and fear. If markets are going up a lot, or down a lot, or if there is press coverage about a big potential change to tax or legislation, such as pension rules, people get on the phone. For existing clients, we try to get across the message that they should not be basing financial decisions on short-term issues that are out of their control, such as inflation and GDP and most clients follow this philosophy Therefore, the Barings research does not particularly concern me as I don’t think the outlook for GDP and inflation will have much direct impact on us. 2013 will just be business as usual.”

OVERMATTER:

Mr Aldridge added: “Multi-asset strategies continue to prove themselves in the face of on-going global economic uncertainty, aiming to produce equity-like returns while reducing volatility. Investing in a range of equities, bonds and alternatives allows multi-asset funds to adapt quickly to changing economic scenarios and market conditions. In our multi-asset portfolios we have been seeking opportunities in more out-of-favour emerging markets and defensive UK equities. From where we stand, the UK equity market is attractive, given its exposure to global growth akin to the US, but at more attractive valuations.”