Three quarters (75%) of advisers avoid complex investments, such as absolute return funds, largely due to a lack of faith in their ability to deliver on their objectives, according to research from Aegon.
Aegon’s 2021 Adviser Attitudes report found half (51%) of advisers were reluctant to recommend complex investment products because of a lack of confidence in them, while 12% noted the difficulty of explaining them to clients and 12% cited cost.
Of the quarter of advisers who felt positively about complex investments , 8% did so because of suitability reasons while 6% listed their ability to deliver on their objectives.
A further 6% said they liked complex investments because of their ability to explain the products to clients.
Aegon said the introduction of both PROD and MIFID II just over three years ago had likely impacted adviser’s views on complex investments, with the regulation increasing transparency around the benefits, risks and charges associated with investment products.
Richard Whitehall, head of portfolio management at Aegon UK, said: “A raft of absolute return and complex products launched following the 2008 financial crisis and have struggled to compete with more conventional multi-asset strategies in the long, bull market that followed. The volatility caused by the outbreak of Coronavirus appears to have been short-lived, and so didn’t help the case for complex solutions.
“The fact that advisers have turned their back on complex investments doesn’t come as a surprise in the current environment. While they’re aiming to do very different things, looking at the risk and return profile of absolute return strategies alongside simpler, multi-asset portfolios, what worries me is the dispersion of returns and risk in the sector.
“It’s my belief that today’s investors are a great deal more cost conscious and want to see value for money from their investments. At this point in time, it’s hard to see this coming from complex investments.”
