Financial advisers believe investment markets will be more volatile this year, driven by uncertainty over inflation and Bank of England interest rate decisions.

Nine out of 10 - 91% - predicted more volatility in 2025.

Nearly a quarter (24%) expected more than 40% of their client base to be put off investing in real assets due to market volatility.

A new poll of financial advisers by Wesleyan revealed that 84% believe the performance of their clients’ investments is under threat in 2025, a rise on the 63% that said volatility would be a threat over the next 12 months last February.

They expected uncertainty over the rate of UK inflation - 59% - and Bank of England interest rate decisions - 56% - to be the most significant contributors to volatility in the year ahead. 

They were also worried about new, intensified or enduring global conflicts - 40% - and uncertainty over inflation in overseas economies - 39%.

More than half - 56% - of advisers expect the majority of their clients at or near retirement to postpone or change their retirement plans due to the threat of market volatility this year, up from 51% last February. 

James Tothill, investment specialist at Wesleyan Financial Services, said: “Volatility has defined markets in recent years. While volatility isn’t inherently bad, it can be a problem if it pushes clients away from investing in the markets, and can pose particular issues for clients in drawdown if it leads to pound cost ravaging. 

“The CEO of the FCA recently heralded an era of ‘predictable volatility’, so the role of advisers will be to help their clients navigate this new normal.”

The survey also looked at the strategies advisers will deploy to help their clients manage the threat of market volatility this year. 

Decreasing clients’ exposure to equities and increasing clients’ exposure to bonds were the most popular strategies, cited by 40%. A quarter (25%) also said they would be starting or increasing client investments in a ‘smoothed’ fund, which actuarily adjusts for market volatility, up from 22% in February.

Mr Tothill said: “Suitability will remain an important advice industry focus next year, and we can expect advisers to help their clients adopt bespoke strategies to manage the impact of market volatility, and asset allocation, based on specific circumstances.”

• The survey of 300 UK-based financial advisers was conducted by Censuswide on behalf of Wesleyan between 29 November and 4 December 2024.