Prevailing macro-economic conditions driving the shift in Advisers’ approach to portfolio construction and product information needs
Leading research firm Investment Trends has released its latest 2022 Adviser Product and Marketing Needs Report. The study examines advisers’ evolving investment product needs and communication preferences while taking a deep dive into their relationship with fund managers.
The latest Investment Trends Report highlights that rising inflation and interest rates, as well as other geopolitical events, have contributed to the steep drop in advisers’ stock market expectations for the next twelve months. Advisers expect an average of only 0.7% in capital growth, significantly down from 3.5% a year ago. Although diversification continues to be the top priority when selecting investments for clients (cited by 68% of advisers), advisers highly attuned to economic conditions are vastly more likely to prioritise liquidity, protection, and high-yield products. One in every two advisers cited the current economic conditions as having a significant impact on their client portfolio construction
“With interest rates on the rise, the proportion of new client money going into Cash, TDs and other fixed income products has increased by 43% this year, the highest it’s been for the past few years,” said Dougal Guild, Research Director at Investment Trends.
The research further revealed that advisers are starting to allocate more new client money to managed accounts and ETFs, both looking set to continue growing based on advisers’ intentions. The higher allocation to both these groups comes at the expense of managed funds, whose share of flows has reduced to 36% in 2022, a drop from 45% in 2021. One in four advisers say they intend to stop using a fund manager in the next twelve months. Of those contemplating leaving, performance and lack of confidence are the primary drivers, however, 43% mention shortcomings around customer service or communication.
“Although poor performance and a lack of confidence are key drivers of attrition for fund managers, advisers have indicated their preference for reliable customer service and impactful communication, making it an important priority for providers to pro-actively engage with their clients to help solidify user loyalty,” added Guild.
The study also found that advisers are increasingly dedicating significant time to researching and are calling for wide-ranging information from product providers, including content about market updates, outlook for the economy, and in recent years, information about the impact of regulatory changes. When it comes to collateral for client education, newsletters, infographics, and news articles are the preferred artefacts, however, demand for social media content is on the rise for end-client education.
“There are significant opportunities for providers to support advisers more by providing research and education to free up some of their time and increase engagement,” said Guild.
