The number of advised clients feeling bearish has dropped off a cliff, according to Schroders’ latest Financial Adviser Pulse Survey.
While in 2020 advisers said 50 per cent of their clients felt bearish, in 2021 they felt the same about a mere 8 per cent of clients.
In fact, more than half (52 per cent) of clients reported feeling either ‘slightly bullish’ or ‘bullish,’ compared to less than a fifth (19 per cent) last year, according to the 161 advisers polled by Schroders.
What's more, three quarters of advisers think the markets will see higher global growth in the next five years and 81 per cent also believe UK growth will be "boosted" in the same time period.
The survey, which is conducted each year, questioned UK financial advisers on a range of topics such as inflation, ESG and general market sentiment.
The advisers said the majority of equity investors, 62 per cent, were currently looking to invest in value stocks.
Advisers are also seeing opportunities in quality companies that demonstrate strong balance sheets and robust
fundamentals.
Almost half (46 per cent) of advisers also expect market volatility to increase in the next five years, which the survey said set the stage “for a cyclical rotation away from growth stocks in favour of value”.
However, concerns regarding market volatility were outweighed by expectations around inflation with the number
of advisers who expect inflation to increase in the next year almost doubling, from 47 per cent in November to
80 per cent in 2021.
Simultaneously, favourability towards equity markets is improving, the survey found. In November, one third
(39 per cent) of advisers expected equities to deliver lower returns than historical averages over the next five years - this has now reduced to 17 per cent.
Alex Funk, chief investment officer, Schroders Investment Solutions, said the results filled him with optimism for UK investors and their advisers.
“Following the impact of the pandemic on investor confidence, we are now starting to see confidence being restored and advisers are starting to seek new investment opportunities for their clients.
“As we look ahead, advisers will be looking for solutions that harness the unforeseen opportunities that are arising from the coronavirus crisis.
"From the acceleration of new trends, market rotations and disruption to the traditional growth sectors, this is a potentially exciting time for the UK’s investment landscape.”
Outsourcing increases
The report also found a fifth of advisers reported that their use of outsourced portfolio management had increased over the year, with 65 per cent saying this was to be able to access investment expertise and resources, and 58 per cent saying they wanted to free up more time to spend with clients.
On the environment, 69 per cent of advisers said the pandemic had increased the attention they will pay to environmental, social and governance risks associated with investments.
The vast majority, 84 per cent, agreed the Covid-19 crisis had reinforced the importance of stewardship and using an asset manager who actively engages with the companies in which it invests.
Gillian Hepburn, intermediary solutions director at Schroders, said: “Financial advisers are becoming increasingly cognisant of environmental, social and governance factors when considering investments for their clients."
She added a key point was how the discussions with clients around sustainable investing were framed.
“Investing responsibly and sustainably does not mean compromising financial returns. At Schroders, we believe that profit and planet are interlinked and in the investment world of tomorrow, investors will assess the value of their investments based on risk, return and impact.
“Although financial advisers are already recognising the benefits of outsourcing their portfolio management, we expect that this will in turn, mean that clients have greater opportunities to access products which take account of ESG risks and that good quality reporting will enable them to gain a deeper understanding of the impact that their investments have on people and planet.”
sally.hickey@ft.com
