Seven in 10 advisers plan to increase use of smoothed funds over the next year – Wesleyan
65% had already increased their use of smoothed funds during the past year, and 88% said recent volatility had made these funds more suitable for certain clients.
Seven in 10 advisers said they plan to increase their use of smoothed funds in the next year, according to research from Wesleyan.
65% had already increased their use of smoothed funds during the past year, and 88% said recent volatility had made these funds more suitable for certain clients.
94% agreed investment solutions must evolve as markets change.
Two fifths said volatility is a significant threat to client outcomes, while 21% expect more than half their clients approaching retirement to change or postpone their plans because of market uncertainty.
Managing volatility from UK political uncertainty (43%), global geopolitical uncertainty (41%), and helping clients remain invested during unsettled markets (39%) were the most common reasons for advisers to use smoothed funds more.
Barriers to wider adoption included cost (36%), regulatory concerns (34%), performance concerns (33%) and product complexity (32%).
James Stacey, investment specialist at Wesleyan Financial Services, said: “Volatility is no longer being viewed simply as a short-term disruption.
“Advisers increasingly need to consider how periods of uncertainty affect not only investment values, but also clients’ confidence and financial decisions.
“For some clients, particularly those investing for the first time or approaching retirement, sharp market movements can make it harder to remain invested.”
Stacey added: “Smoothing can help manage the investment journey and reduce the impact of short-term market movements, although it does not remove investment risk or guarantee returns.
“The findings don’t suggest smoothing is right for every investor.
“They show that advisers increasingly see it as one option within a broader investment toolkit.”
He said: “Providers need to address the barriers advisers have identified by being clear about costs, performance, risk and how smoothing works.
“Good-quality education and transparent information will help advisers assess when these funds may be appropriate for an individual client.”
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