What's the point of a survey? Do the findings pass the ‘so what' test, providing insight that is genuinely newsworthy? Or do they simply reconfirm widely held views?
I believe that the best surveys can do both, delivering an interesting message while providing reassurance that preconceptions are correct . Last month Schroders commissioned a special survey to understand how advisers were working with clients during the current Covid-19 pandemic.
Here's my take on some of the findings:
1. Retirement plans:
Reconfirming: Only 5% of clients approaching retirement have brought forward their retirement date. This is perhaps unsurprising given current uncertainties.
Something new: Nearly 50% of clients approaching retirement have delayed this due to concerns.
Post Pensions Freedom, three key risks for those taking an income at retirement from their pension fund were identified as sequence risk, longevity risk and market risk. All three are in sharp focus at the moment and in particular, sequence risk.
Put simply, sequence risk is concerned with the impact that a stock market crash can have early in retirement. If this happens and income withdrawals remain at the same level then the client is effectively withdrawing a larger percentage of their portfolio to achieve the same income - plus hoping for advantageous market conditions to replenish this fund.
In situations like this, clients may need to review their existing fund, the level of risk being taken and their investment strategy. Alternatively, they could consider reassessing their income requirements. However, last year our Global Investor Survey showed that 79% of clients expected to take 4% income and on average there was an expectation that their portfolios could return 10.7% per annum. Indicators like these would suggest a resetting of customer expectations may be required.
2. Attitudes towards sustainable investing:
Reconfirming: 33% of advisers thought that the Covid-19 crisis would impact client attitudes towards sustainable investing. We are all experiencing some of the environmental changes which the current reduction in pollution is bringing . As I write from ‘lockdown' in Scotland, even here the sky is an incredible shade of blue.
Something new: This is not just about climate change. 68% of advisers told us that the crisis would increase the attention they pay to environmental, social and governance (ESG) factors when selecting investments and a massive 88% reported that ‘the coronavirus crisis reinforces the importance of stewardship and using an asset manager that actively engages with company management.'
Active engagement is extremely important to us at Schroders and in 2019 we had over 1,750 active engagements with companies.
The survey results further strengthen what investors told us last year. 60% believed that individual investment choices can make a difference to building a sustainable world and 57% will always consider sustainability factors when investing.
The agenda will continue to change as legislation anticipated to come into force next year requires advisers to discuss sustainability preferences with their clients as part of the suitability process.
Last year 59% of investors told us that they want access to information from their financial adviser so in addition to providing investment solutions for clients we also have an obligation to continue to provide information and education for both advisers and investors.
3. Client communication
Reconfirming: Financial advisers have been spending more time than usual speaking to their clients with 73% speaking directly with more than 25% of their clients during March (an increase from 36% of advisers in an average month).
We would expect that to be the case in times of severe market volatility but we also asked what had been their biggest challenge in managing client portfolios through the crisis?
Something new: 3 key themes emerged from the many comments financial advisers gave us:
- Income for clients - Generating this against a backdrop of reduction in natural income, dividend suspensions and reviewing income funds in light of their capital loss were described as challenges.
- Encouraging clients to sit tight -‘Keeping clients informed and reassured', ‘encouraging clients not to make hasty decisions' and ‘calming their fears' were some of the phrases used and quite simply demonstrate the value of good quality financial advice.
- Making sense of the future - Perhaps there is now some light at the end of the tunnel as the global lockdown starts to ease. However as one adviser said ‘there are still too many uncertainties and it's difficult to predict what will happen next'.
This is where asset managers and financial advisers can truly work in partnership. The combination of trusted adviser/client relationships and partners delivering investment expertise can ensure that advisers don't share concerns such as ‘knowing when to rebalance to avoid crystallising losses or ‘picking the bottom of the market' and result in customers receiving the best possible service and investment advice in the months and years to come.
Gillian Hepburn, Intermediary Solutions Director, Schroders
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