Two thirds of financial advisers believe market volatility will threaten the performance of their clients’ investments in the next 12 months.
A poll conducted by Wesleyan found 51 per cent of advisers expect their clients at or near retirement to postpone or change their retirement plans due to the market volatility.
Uncertainty over the Bank of England’s interest rate decisions was the most popular factor which advisers thought was contributing to the volatility.
This was followed by uncertainty over the rate of inflation, a prospect of a general election and a new presidential election in the US.
Despite the threats of market volatility, 33 per cent of advisers said they expect their clients to become more risk averse in the next year.
While roughly the same proportion said they expect their clients’ appetite for risk to increase (32 per cent) or stay the same (34 per cent).
The poll also revealed two thirds of advisers expect their clients’ capacity for loss to decrease or increase in the next 12 months with just over a fifth expecting it to remain the same.
Nick Henshaw, head of intermediary distribution at Wesleyan, said: “Economic and political turbulence could affect client outcomes in the next year and advisers will have to carefully consider the interplay between their clients’ individual risk appetites and capacities for loss when developing a strategy that offsets volatility and continues to support their long-term goals.”
The survey also looked at the strategies advisers will deploy to help their clients manage the threat of market volatility over the next 12 months.
It found starting or increasing client investments in a ‘smoothed’ fund that actuarially adjusts for market volatility and decreasing clients’ exposure to equities were the most popular strategies, followed by decreasing clients’ exposure to cash.
Henshaw added: “Advisers are turning to specialist funds to help their clients mitigate market volatility and maintain effective risk, balanced portfolios.”
alina.khan@ft.com
