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Retirement income becomes most common client investment need
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Nearly 80% of respondents favour multi asset and equity investments for income
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Interest rate hikes considered key risk for 2016
In a survey of 422 financial advisers and wealth managers, 40.3% cite income in retirement as the most common investment need their clients seek advice on, which is up significantly from 26.7% in the previous year. This change highlights the immediate and tangible impact last year’s Pension Freedoms rules are having on advisers’ businesses.
Commenting on the findings, John Clougherty, Head of Wholesale at Fidelity International, said: “With retirement lasting as long as 30 years, or more for some, making the right financial decision is extremely important. Pension freedoms have given retirees added flexibility with their pension savings, but as our survey highlights there is a clear need for expert help in such a significant, but complex area.”
While demand for income in retirement advice may have usurped the top spot, long-term wealth accumulation and wealth preservation remain important aspects of advisory business with 39.8% and 17.3% respectively.
Demand for advice in 2015
Where to find income?
As the need for retirement income grows, the ability to deliver attractive and sustainable returns becomes increasingly important. Over 40% of respondents favour multi asset investments to deliver an attractive and sustainable income in the next 12 months, while 35.6% think equities are best placed.
The positive view on multi asset and equities is reflected in commensurate caution towards bonds, a traditional income generating asset class, with only 3.8% of advisers and wealth managers favouring fixed income.
Favoured asset classes for a reliable and sustainable income in 2016
Risks in 2016
Interest rate normalisation was probably the most talked about investment theme in 2015. Despite some clarity from the Federal Reserve in December’s landmark rate hike, monetary tightening remains a major concern for advisers. 63.5% of respondents feel rising interests rates will impact their investment recommendations in 2016.
Equity market volatility and global growth concerns were also among advisers’ top concerns for the year ahead. Political risk is also playing on advisers’ minds with 41.9% citing the impending EU referendum as a risk to their investment recommendations.
Influencing factors for investment recommendations in 2016
With the above risks in mind, 71.8% of advisers and wealth managers surveyed believe equities will deliver the best returns for clients in 2016. Interestingly, 2015’s emerging market woes have not deterred advisers, as 76% of respondents intend to recommend their clients either increase or maintain their exposure to the sector.
Commenting on the survey results, John Clougherty, Head of Wholesale at Fidelity International, said: “If 2016 continues in the same vein as last week, then we are in for an interesting year. Rising interest rates, increased volatility and a potential EU referendum are just some of the hurdles advisers and their clients will need to contend with when considering their investment decisions this year.
"The recent market volatility serves as timely reminder as to why good financial advice is so important. Markets are notoriously difficult to predict, but investing indiscriminately across the entire market could leave investors exposed. Oil stocks, which dominate the FTSE 100, are a great example. Using a bottom up research based approach our portfolio managers and analysts look to distinguish between good and bad companies irrespective of the economic backdrop. While a single asset class or region might not be flavour of the month in the eyes of some, our managers can still find good quality investments.”
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