A study conducted by Baring Asset Management in December 2014 found that 41% of 114 IFAs surveyed will be increasing their clients’ exposure to multi-asset products offering regular income streams within the next year, in reaction to rising volatility.
The upswing also applied to multi-asset growth funds, with 46% of IFAs saying they plan to increase exposure – up from 30% in Q1 2014.
Popularity of multi-asset generally was also on the up with 36% saying they are steering clients towards investment in multi-asset solutions.
In addition, 29% of those questioned said that they are “very favourable” towards multi-asset approaches, while 73% classed themselves as “favourable”.
Rod Aldridge, Barings’ head of UK wholesale distribution, said: “In light of significant UK pension reforms, we believe there will be an increasing need for products that are designed to provide a regular income while minimising risk. Multi-asset products can fit this market very effectively.”
Patrick Connolly, head of communications at Chase de Vere, agreed with Aldridge’s view, outlining the versatility of multi-asset solutions.
He explained: “A multi-asset approach doesn’t stop you from taking on higher risk, and at the same time it also doesn’t stop you from taking on less risk. But it does mean that you do not have all of your eggs in one basket.
“Clients want to make gains but they also want to protect the money that they have, especially as they get older and build up more investment in ISAs and pensions, when capital protection becomes as, if not more, important than capital growth.”
Connolly was unsurprised by the rising popularity of multi-asset solutions, saying he was more concerned that it took increased volatility to act as a catalyst.
“There is always going to be market volatility and no one knows how markets will perform going forwards,” he elaborated.
“The multi-asset approach should always be the approach used regardless of what is happening in the markets. [In response to] some advisers adopting multi-asset because of what is happening now, I would say they should always be worried about what is happening in the markets.”
Gareth Thomas, Brewin Dolphin’s head of managed investment solutions, believes that the statistics could be in part attributed to the changing environment brought about by the retail distribution review.
“Post-RDR there has been a rise towards outsourcing in general,” he said. “Some financial planners are asking themselves ‘what are we particularly great at?’, which is not always the investment management side. Volatile markets certainly do lead to a number of advisers thinking ‘is this really what I need to be doing or can I put this out to someone else?’
“But it is not a single determining factor. RDR may be the catalyst, along with more volatile markets, but it is also advisers looking at their profitability as well as deciding what aspects of investing they are good at and outsourcing the other elements, such as investment management.”
