- Almost three quarters (73%) of financial advisers have helped all or most of their clients increase their equities exposure ahead of anticipated interest rate cuts.
- Nine in 10 (89%) advisers who have helped or are planning to help clients increase their equities exposure are doing so because they expect their cash returns won’t deliver what they need.
- Advisers are supporting clients who are anxious about increasing their equities exposure by turning to smoothed funds (45%), increasing the frequency of meetings (43%) and using cashflow modelling (37%).
According to a new poll of financial advisers by Wesleyan Financial Services, advisers are helping clients to increase their equities exposure because they’re worried cash returns won’t cut it if interest rates fall.*
Almost three quarters (73%) of advisers have helped all or most of their clients increase their equities exposure ahead of anticipated interest rate cuts. A further 24% said they’d helped some, while 3% said they haven’t done this for any clients yet but expect they will have to.
Of these advisers, nine in 10 (89%) said they were helping their clients increase their equities exposure because they expect their cash returns won’t deliver the returns they need.
The news comes ahead of the Bank of England’s next Monetary Policy Committee meeting on June 20.
Nick Henshaw, Head of Intermediary Distribution at Wesleyan, said: "The economic climate is still fast moving, and advisers are helping clients to adjust their investment strategies accordingly.
"The scale and speed of future rate reductions is far from certain, as external headwinds beyond just the rate of UK inflation are still in play.
"A rate cut – when it comes – could weaken the case for some clients holding cash, and it’s clear advisers are recognising and acting on this. But advisers also know monetary policy is just one factor to consider when determining asset allocation."
Wesleyan’s research also asked advisers if the clients they’d helped to increase their equities exposure were concerned about doing so. More than two fifths (43%) said clients were concerned that it would mean taking more risk, while 41% were worried about market volatility.
When asked how they are helping clients who are anxious about increasing their equities exposure, 45% said they had started or increased investments in a smoothed fund. A similar proportion (43%) are increasing the frequency of client meetings to discuss any concerns, while 37% are using cashflow modelling tools to show the potential benefits of increased equity exposure.
Nick Henshaw added: "Smoothed funds can provide a middle ground for clients who are looking to reduce their cash allocation as they re-engage with equities.
"These funds invest across a diversified range of asset classes and employ an actuarial mechanism where, during times of strong fund performance, some returns are held back. These are then re-distributed during periods of weaker fund performance, reducing volatility and helping to moderate risk."
* Survey of 300 UK-based financial advisers, conducted by Censuswide on behalf of Wesleyan between 15th and 21st May 2024.