Equities? No thanks. Bonds? Nope, neither
Equities? No thanks. Bonds? Nope, neither

Equities? No thanks. Bonds? Nope, neither

Advisers are starting to worry about equities. With the second-longest bull run in history about to enter its tenth year, nearly a third of advisers at Russell Investments’ Adviser Sphere event, held on October 7, said they will reduce their clients’ exposure to equities by the end of the year.


This is perhaps not surprising – clients holding their equity allocations from 2009 have more than tripled their money, and capital preservation is now on the minds of many.

Source: Russell Investments. For illustrative purposes only.

 

Concerns about fixed income are rising too, with a fifth of advisers planning to scale down bond allocations in clients’ portfolios.

So where will the cash from the sale of these assets end up? The answer, it seems, is in multi-asset strategies.

Source: Russell Investments. For illustrative purposes only.

 

Some 44% of advisers intend to recommend increased allocations to multi-asset funds by the end of 2017. Cash is also favoured, as advisers grow increasingly concerned about valuations in both the equities and bond markets.

Advisers’ preoccupations are not confined to markets. Some of the biggest pieces of regulation in history are about to land in advisers’ laps in the next few months. And they are taking it seriously.

With MiFID II set to swing into action in January, the Insurance Distribution Directive in February and reviews into financial market advice and pension transfers concluding in 2018, it is little wonder that advisers see regulation as an urgent priority.

Source: Russell Investments. For illustrative purposes only.

 

In fact, 48% of advisers said revising their regulation strategy is their main priority in the short term. This was prioritised even over adjusting client portfolios in preparation for any market downturn, or revising their approach to DB transfers.

Despite their obvious concern about regulation in general, most advisers believe they are well positioned to tackle the hydra-headed beast that is MiFID II. Some 82% are confident they are prepared for the Directive, with just 9% saying they are not confident.

Source: Russell Investments. For illustrative purposes only.

 

Meanwhile, the recent rush by DB pension members to cash in on historically-high transfer values, has got advisers scratching their heads. They face a raft of challenges in helping clients deal with DB transfers. The volume of challenges is reflected in their responses to a poll question on the DB transfer market.

Source: Russell Investments. For illustrative purposes only.

 

Advisers’ concerns are evenly split across a range of DB transfer issues, suggesting some confusion over the way ahead. It is likely that future polls will see responses centring on one or two issues, rather than a wide range, as some of the challenges are met head on and are resolved.

Asked about future change in the wider investment industry, advisers see technology as the biggest driver, followed by increasing fee transparency and greater regulation.

Source: Russell Investments. For illustrative purposes only.

 

The final poll question is one very close to advisers’ hearts: how to encourage individuals to start or increase long-term savings. A large majority of advisers said education is the key.

Source: Russell Investments. For illustrative purposes only.

 

Others believe a reduction in the cost of investing and greater transparency will provide the key to unlocking higher volumes of savings.


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