Advised clients are moving their money away from cash and back towards equities as interest rates subside, according to a new survey of financial advisers.

The latest Schroders UK Financial Adviser Survey reveals that the percentage of advisers’ clients investing, or considering investing, has risen from 49% in May to 67% now. 

The shift follows recent cuts in interest rates after Bank of England base rate cuts.

Schroders says the trend aligns with advisers' anticipated allocation strategies for the coming 12 months, which highlights a “clear move” away from cash.

Although bonds still feature as they did 15 years ago in the first adviser survey, 36% of advisers now expect to increase allocations to UK equities and 34% to developed international equities.

The original Schroders Adviser Survey in 2009, found that advisers predominantly preferred bonds over equities when recommending asset classes to their clients.

ADVISER SENTIMENT

Advisers say they are cautiously optimistic about market performance, with 23% expecting higher equity returns compared with long-term averages.

Some 57% anticipate increased global growth, however 70% expect heightened geopolitical disruptions over the next five years and 43% predict higher market volatility.

Schroders says the current environment may have affected client sentiment, as the percentage of advisers reporting a bullish outlook among clients has decreased to 34%, down from 41% in May 2024. Nonetheless, this figure remains markedly higher than the 17% recorded in November 2023.

FEES

In terms of adviser fees, the survey found that the proportion of advisers with an ongoing advice charge of 0.5% or below has fallen to 4%, down from 26% in 2022. 

Schroders says this suggests that more advisers are moving towards fee levels that better reflect the "value and complexity" of the services they provide. Some 57% of advisers have an ongoing advice charge of between 0.5% and 0.75%, up from 37% in 2022. A substantial portion of the sector is converging around this mid-tier fee level, according to Schroder. Very few advisers – just 1% – charge above 1% on an ongoing basis.  Fewer advisers now report feeling downward pressure on fees, with 39% perceiving such pressure compared to 44% a year ago. 

REGULATION

Among other issues for advisers, regulation continues to be a “primary concern” with the number of advisers ranking it their number one concern rising from 32% in 2022 to 49% in 2023.

A significant contributing factor has been the introduction of The Consumer Duty, with 42% of advisers believing it will have a high or reasonably high impact on their business, compared with 25% two months before its introduction back in May 2023.

Regulatory factors such as the focus on annual client reviews and the Retirement Income Review may be contributing to this heightened focus on regulation, the firm says. Following the FCA's thematic review of Retirement Income Advice, 65% of advisers have now reassessed their proposition, far higher than the 33% in May this year.

CLIENT SERVICING

The survey also found a notable shift towards prioritising the servicing of existing clients, now ranked as the second most pressing concern which may be indicate a focus on annual client reviews, says Schroders.

The survey highlighted continuing concern among advisers about inter-generational wealth transfer, with 62% concerned about losing assets as wealth transfers across the generations. Just over half (53%) are reporting an increase in the average age of clients over the past five years.

CLIENT SEGMENTS

Only 20% have developed a tailored sales and marketing strategy aimed at younger investors and there is a sharp decline in the proportion of advisers willing to accept new clients with less than £50,000, which now stands at 26%. Those willing to take on new clients with over £200,000 has risen to 24%, up from just 10% in 2020.

The percentage of advisers with a dedicated sales and marketing strategy for retaining, attracting, and advising female clients has experienced a modest rise, from 10% last year to 12%.

The survey results also revealed that, in response to Consumer Duty, 35% of advisers are looking to increase the use of outsourced discretionary model portfolios.

ARTIFICIAL INTELLIGENCE

Artificial intelligence (AI) remains high on the agenda for advisers. More advisers are adopting AI, with only 10% stating they do not expect to utilise it, a significant decrease from 27% in May 2023. Some 21% of firms have already implemented some form of AI technology.

• Data is from the November 2024 Schroders Financial Adviser Survey,  conducted online between 23 October and 5 November. The survey was completed by 293 advisers.