56% of advisers ‘always’ or ‘often’ recommend multi asset or multi-manger funds for clients in drawdown, a 56% increase year on year (56% in 2021 vs 36% in 2020). The research also shows over one in five (22%) advisers will increase use of multi-asset or multi-manager funds over the next three years for retirement clients, compared to only 5% who plan to decrease ‘slightly’.
Aegon and Next Wealth Report 2021: Managing Lifetime Wealth: retirement planning in the UK
The move to multi-asset or multi-manger funds reflects, in part, the challenges advisers face in running and monitoring more complex models, such as in-house risk rated model portfolios and bespoke portfolios, which have seen use decrease by 9% and 17% respectively since last year (Jan 2020). Advisers, particularly within smaller firms, cite the operational challenges of managing these portfolios on an advisory basis and the business risk which comes from the increased regulatory focus.
Key legislative changes, such as MIFID II and PROD, have contributed to the trend towards simpler and lower-cost investment strategies that are easier for advisers to explain to clients and represent value for money. This was highlighted in the qualitative interviews for this research, where advisers suggested they are turning to multi-asset funds due to affordability and simplicity.
Furthermore, as clients increasingly look towards ESG investing, there has been an emergence of low-cost multi-assets funds which have specific ESG considerations built into them.
Tim Orton, Managing Director of Investment Solutions at Aegon comments: “Multi-asset funds have grown hugely in popularity in recent years. These funds can offer investors a well-diversified portfolio that manages risk over the long-term at a competitive price. For retirement clients, advisers are increasingly turning to these funds to grow assets and provide income in drawdown, rather than more complex and costly alternatives where value for money is more difficult to demonstrate.
“Robust multi-asset fund governance also makes it easier for advisers to meet their regulatory requirements, something that’s been front of mind with the introduction of MIFID II and PROD requirements.”
Managing Lifetime Wealth: retirement planning in the UK
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