Gillian Hepburn, Head of UK Intermediary Solutions, Schroders
The responses to our recent Schroder Adviser Pulse Survey suggest that the pandemic has shifted the approach some advisers are taking with their investment proposition.
20% of financial advisers indicated that they have increased the amount of client assets that they outsource to an investment partner in the last year. So why might that be the case?
Download a copy of the Schroder Adviser Pulse Survey Report
The chart below, which sets out advisers' reasons for choosing to work with a partner in the first place, goes some way to providing an answer:
It suggests that the most important factor for advisers is access to investment expertise and resources. This is followed by gaining more time to spend with clients. Probing further down the list, you'll find effective volatility management and integration of sustainability which are both inextricably linked back to access to investment expertise.
Holding your client's hand
In our previous survey, advisers reported that they had devoted a significant amount of their time to ‘holding clients' hands' and encouraging them to remain invested during the early days of the pandemic, when there was extreme volatility in the market.
This will have paid off for many clients who remained invested as a result: they are likely to have benefitted from the full bounce in the market, with portfolios rising back above pre-pandemic levels in many cases; and they are also likely to be in a better place emotionally regarding their investments, recognising the value of having a financial adviser.
The risk appetite of clients has also been tested in a live environment rather than just through hypothetical risk questionnaires. ‘How would you feel?' can now be replaced by ‘How did you feel?'
A focus on sustainable solutions
Despite navigating clients successfully through the pandemic, the sheer stress of managing assets through the crisis may largely explain why we're seeing more advisers move away from building their own portfolios and seeking an experienced investment partner. Sustainability is also likely to be playing a part as over 50% of advisers cited integration of sustainability as a reason for outsourcing.
Many advisers are still on a journey with ESG and sustainability. Clients are asking for information and investment solutions requiring specific expertise that they may struggle to fulfil.
Turning to an expert for support can provide access to a range of sustainable investment solutions and deliver training and education to help with the client conversation. This last point is really important as clients want to understand both how their sustainability requirements are being met and how their portfolio is contributing to addressing issues such as climate change and the transition to cleaner energy.
A sharper focus on the ‘S' and ‘G' of ESG
The pandemic has led to a sharper focus on the ‘S' an the ‘G', social and governance factors - how did the companies invested in behave during the pandemic? How did they treat their staff and customers? Do they operate a business whose future will be sustainable?
Outsourcing sustainability requirements can help to demonstrate the positive impact of a client's investments across all three ESG factors and how this can be achieved without compromising their returns.
The survey indicates that 69% of financial advisers will now pay greater attention to the ESG risks associated with investment and 84% agreed that the coronavirus crisis reinforces the importance of stewardship and using an asset manager who actively engages with company management. However, asset managers need to be held to account and provide reporting which substantiates claims they make in relation to this.
Final words
So in response to our initial question, the pandemic has led to a change in the level of outsourcing and our recent financial adviser survey has highlighted some insights into the reasons behind this.
Click here to download a copy of the Schroder Adviser Pulse Survey Report. To find out how Schroders can support you, just visit www.schroders.com/investment-solutions, contact your usual Schroders' representative or call our Business Development Desk on 0207 658 3894.
Source: Schroders Adviser Survey 2021.
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