The survey, drawing on the views of UK advisors, shows how concerns about high inflation continue to affect asset allocation decisions.

Rising cost-of-living worries mean that the overwhelming majority of 180 financial advisors polled by Schroders said they discuss trade-offs of holding cash versus long-term equity investing. 

The findings came in Schroders UK Financial Adviser Pulse Survey 2023, issued yesterday. It also showed that 89 per cent of advisors’ clients have changed investment plans because of high inflation. That compares with 53 per cent changing tack in November last year.

The relentless focus on rising inflation and central bank steps to curb it with higher rates has changed the asset allocation chessboard, confronting clients with the dilemma of how to invest to have enough money for retirement and other purposes.

Up to 60 per cent of advisors’ clients cited higher household costs as a reason for changing their plans, and 44 per cent cited having to help their wider family as a reason. Some 66 per cent of advisors surveyed also reported that a quarter of their clients have already adjusted their plans.

The top concern for clients is losing capital, although this worry has eased since the November 2022 survey.

The difficult market background may have contributed to the fact that despite some progress in the last six months in equity markets, 44 per cent of advisors reported that sentiment among their clients remains bearish, although this has dropped from 68 per cent from November.

In other details, the large majority (80 per cent) of advisors said they expect inflation to weaken over the next five years and 63 per cent expect that interest rates will do likewise. Some 31 per cent of advisors expect equity market returns to be lower than historical averages over the next five years.

Advisors view prospects for bonds as more positive with 26 per cent expecting returns to be higher than historical averages.

Consumer Duty regime 
The Financial Conduct Authority's Consumer Duty regime – first proposed in May 2021 – will come into effect on 31 July.

The survey found that 4 per cent have not yet started to prepare. Some 19 per cent of advisors are fully prepared. The remaining 77 per cent said that their preparations are in progress and that they should be ready for the end of July. Only 25 per cent of them said the regime would have an “above-medium” impact on their business. 

The Consumer Duty framework, which is designed to set higher and clearer standards of consumer protection across financial services, requires firms to put their customers’ needs first in order to deliver good outcomes. A “traffic light” system operates to show whether firms are achieving high standards, have work to do, or are underperforming.