Financial advisers are anticipating an increased allocation to equities over the next 12 months as investors reduce their cash holdings, according to the Schroders UK Financial Adviser Survey 2024.

It found a “significant shift” away from holding cash back to investing, with the proportion of advisers reporting that their clients were now investing or considering investing rising from 49 per cent in May to 67 per cent.

This trend aligned with advisers’ expected allocation strategies for the next 12 months, which showed a move away from cash towards equities.

More than a third (36 per cent) anticipated a rise in their UK equities allocations, while 34 per cent expected an increase to their allocations to developed international equities.

Market performance

Schroders found that advisers were “cautiously optimistic” about market performance, with 23 per cent expecting higher equity returns compared with long-term historical averages, while 57 per cent anticipated global growth to rise.

However, it also identified concerns around potential volatility, as 70 per cent believed geopolitical disruptions would heighten over the next five years and 43 per cent forecast higher market volatility.

The proportion of advisers reporting a bullish outlook among their clients fell from 41 per cent in May to 34 per cent, although this was still higher than the 17 per cent recorded in November 2023.

Regulatory concerns

Advisers’ primary concern moving into 2025 continued to be regulation, with the percentage of advisers ranking it as their number one concern rising from 49 per cent in 2023 to 57 per cent this year.

One potential driver for the focus on regulation was the introduction of the Consumer Duty, with 42 per cent of advisers now believing it will have a ‘high’ or ‘reasonably high’ impact on their business, up from 25 per cent two months before its introduction in May 2023.

Schroders added that the focus on annual client reviews and the Retirement Income Review may also be contributing, noting that 65 per cent of advisers have now reassessed their proposition since the review, up from 33 per cent in May 2024.

It also identified a “notable shift” towards the servicing of existing clients, which was now ranked as the second most pressing concern (16 per cent), which Schroders said should be indicative of the focus on annual client reviews.

Wealth transfer

Schroders also highlighted continued concerns around intergenerational wealth transfer, with 62 per cent of advisers worried about losing assets as wealth transfers across generations.

More than half (53 per cent) stated that the average age of their clients had increased over the past five years.

Despite this, just 20 per cent had developed a tailored sales and marketing strategy aimed at younger investors.

Furthermore, there has been a decline in the proportion of advisers willing to accept new clients with less than £50,000, which now stands at 26 per cent, while those willing to take on new clients with over £200,000 has risen to 24 per cent.

While the proportion of advisers with a dedicated sales and marketing strategy for retaining, attracting, and advising female clients rose to 12 per cent, Schroders said there was a “significant disconnect” in this area, with only 34 per cent of women indicating that they would continue with their family adviser in the event of their partner's death.

Shifting trends

The survey showed that, in response to Consumer Duty, 35 per cent of advisers were looking to increase the use of outsourced discretionary model portfolios.

Of those who do outsource, there was an increase in expected allocations to multi-asset funds from 27 per cent in November 2023 to 35 per cent.

Meanwhile, more advisers were found to be adopting artificial intelligence (AI), with the percentage of advisers not expecting to utilise it falling from 27 per cent in May 2023 to 10 per cent in November 2024.

More than a fifth (21 per cent) of survey respondents had already implemented some form of AI technology.

“The market landscape has seen a number of shifts over the last 15 years, presenting challenging conditions for investors. It is particularly encouraging to see this year's results reflecting a renewed sentiment towards investing, with advisers increasingly focusing on equities and seeing opportunities especially within the UK,” said Schroders head of regulatory and advisory sales, Jamie Fowler.

“While clients are generally more bullish, a substantial proportion still remains neutral, highlighting the critical role of advisers in navigating ongoing volatility and enhancing clients' understanding of their investment choices."

Benchmark, part of the Schroders Group, commercial director, Gillian Hepburn, added: "Celebrating the 15th anniversary of this survey offers a chance to reflect on the significant changes in our industry since 2009 when we were emerging from the credit crunch and in the middle of implementing the Retail Distribution Review.

“As an example, a key debate in 2009 was the use of a single platform where 90 per cent of the advisers surveyed believed they could put all their business onto one platform. The platform market has matured significantly and the 2024 survey indicates that only 18 per cent rely on a single platform for new business.

“This year’s survey also highlights the increasing impact of regulation on advisers and their businesses. Factors such as Consumer Duty, the Retirement Income Review, Dear CEO letters, and the emphasis on annual client reviews have all contributed to increased pressure and concern within the industry.”

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