There are some big considerations for financial advisors right now, with interest rates, AI, and the intergenerational wealth transfer among them.
But what do advisors from across the US think about these topics and what are clients demanding from them on the things that matter to them?
A new report from Schroders shines a light on advisor sentiment with 40% of respondents coming from independent broker dealers, 26% RIAs, 14% wirehouses, and 10% tied to banks, among others.
Almost four in ten of the advisors included advise on less than $100 million in assets, while around half advise on between $100 million and $500 million, and 14% advise on more than $500 million.
Asked about the factors that advisors believe will have an influence on clients’ assets over the next 12 months, interest rates come out top (74% said this) tied with central bank policy (74%), with economic downturn in third place (65%). Inflation risk, geopolitics, and strong consumer spending all score more than 50% while less than half cited AI and increased regulatory pressure.
While AI may not be of major concern for its impact on client portfolios, almost six in ten respondents consider the technology to be both an opportunity and a threat to their business. A further 27% say it’s an opportunity and another 9% say it’s a threat with 6% unsure.
Digging deeper into AI and other disruptive technologies, 60% of advisors have positive sentiment on its integration for investment research and portfolio construction internally, 60% are positive on its use for internal operational processes, and 59% are positive on its use by external asset managers for investment research and portfolio construction.
Around half of respondents appear favorable towards AI’s impact on client communications and service by asset managers, and for client engagement and marketing by asset managers. But sentiment slips to just 36% of respondents seeing positives in client relationships for their own organization.
The report also asked advisors about the importance of clients considering wealth transfer with almost 70% citing it as very important and 30% saying it is somewhat important.
On this topic, 85% said it was important to meet with client’s spouses and 77% said this of younger members of clients’ families. Most advisors said their firms have a specific strategy for managing wealth transfer and most agree that conversations have to be adapted for different genders/age.
Advisors also gave their views on private markets with 58% saying their firm has a private markets offering.
On what clients consider important benefits for investing in private markets in the next 3-5 years, diversification, potential higher returns versus public markets, and risk management were the top three.
Almost half of advisors said their clients have little or no appetite for sustainable investing/ESG with 21% having become more negative over the past year compared to just 9% who are more positive and 71% who are about the same.
On fixed income investments, the three biggest investment opportunities for the next 1-2 years are investment grade corporate debt, high-yield debt, and flexible bond strategies. The three biggest risks cited are growing concerns over debt issuance and how this will affect monetary policy going forward, macroeconomic risks, and interest rate decisions and withdrawal of quantitative easing.
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