Multi-asset funds ‘hugely’ favoured for drawdown

13 May 2021

Multi-asset funds have grown in popularity among retirement clients, new research from Aegon showed.

According to Aegon’s report Managing Lifetime Wealth: retirement planning in the UK, over half (56%) of advisers recommend multi asset or multi-manager funds for clients in drawdown, up 56% year-on-year. In addition, more than one in five advisers (22%) plan to increase use of these funds over the next three years for retirement clients, compared to just 5% who plan to decrease.

In contrast, more complex products such as in-house model portfolios and bespoke models have become less popular among advisers. Both have seen their use decrease – by 9% and 17% respectively – since January 2020. Advisers cited the operational challenges of managing these portfolios on an advisory basis and the business risk which comes from increased regulatory focus.

Key legislative changes such as Mifid II and Prod have also contributed to the trend towards simpler and lower-cost investment strategies that are easier to explain to clients and represent value for money, Aegon said.

Tim Orton, managing director of investment solutions at Aegon, said: “Multi-asset funds have grown hugely in popularity in recent years. These funds can offer investors a well-diversified portfolio that manages risk over the long-term at a competitive price.

“For retirement clients, advisers are increasingly turning to these funds to grow assets and provide income in drawdown, rather than more complex and costly alternatives where value for money is more difficult to demonstrate.

“Robust multi-asset fund governance also makes it easier for advisers to meet their regulatory requirements, something that’s been front of mind with the introduction of MIFID II and PROD requirements.”

Professional Paraplanner