Private markets and sustainable investing are also covered in new report
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 Canada 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 39% of respondents tied to a bank or other financial institution, 31% independent financial advisors, and 14% associated with a brokerage/mutual fund/securities company.
Almost six in ten of the advisors included advise on less than US$100 million in assets, while around four in ten advise on between $100 million and $500 million, and 4% 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) followed by economic downturn (68%) and central bank policy (65%). Inflation risk is cited by 59% while geopolitics, AI, and strong consumer spending all score less than half.
AI For Advisors
While AI may not be of major concern for its impact on client portfolios, more than six in ten respondents consider the technology to be both an opportunity and a threat to their business. A further 30% say it’s an opportunity and another 5% say it’s a threat with 2% unsure.
Digging deeper into AI and other disruptive technologies, 72% of advisors have positive sentiment on its integration for investment research and portfolio construction internally, 65% are positive on its use for internal operational processes, and 61% are positive on its use by external asset managers for investment research and portfolio construction.
Around six in ten respondents appear favorable towards AI’s impact on client communications and service by asset managers, along with around half for client engagement and marketing by asset managers, and for client relationships for their own organization.
Wealth Transfer
The report also asked advisors about the importance of clients considering wealth transfer with 60% citing it as very important and 35% saying it is somewhat important.
On this topic, 84% said it was important to meet with client’s spouses and 78% 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.
Client Investments
Advisors also gave their views on private markets with 56% 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 four in ten advisors said their clients have little or no appetite for sustainable investing/ESG with 16% having become more negative over the past year compared to 18% who are more positive and 66% 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 money market funds. The three biggest risks cited are macroeconomic risks, political risks, and interest rate decisions and withdrawal of quantitative easing.
