Brexit is the single biggest concern for investors, according to Schroder’s latest annual UK adviser survey.

The survey found that 94% of investors raised the issue of Brexit in conversations with financial advisers.

Since the European referendum over three years ago, 40% of clients have moved money out of UK assets as a result, with 74% increasing their asset allocations to the US, the strongest performing equity market since the Brexit vote. This movement to the US was consistent with the 2018 survey findings.

22% of advisers report an increased asset allocation to Europe, compared to 52% in 2018 and 50% in 2017, while a quarter of advisers said they would make significant tactical changes to portfolios in the event of Prime Minister Boris Johnson’s proposed Brexit deal. In the event of a ‘no deal’ exit from the European Union, this increases to 35%.

The research also found that geo-politics, low interest rates, an equity market correction and a global recession are also prominent concerns.

For the first time, Schroders also asked advisers whether they consider ESG in their fund selection and how they see changes in the environment, including climate change, impacting the investment environment, with 76% expecting greater disruption over the next decade.

The research also asked about intergenerational wealth transfer, an area where advisers see an opportunity for their businesses.

ESG – A growing awareness

Advisers believe disruption will be the prevailing theme for the next decade, with 76% believing that disruption from changes in the environment, including climate change will increase.

Just under 50% of advisers said that climate change was raised by clients either ‘fairly frequently’ or ‘most of the time’ in conversation. 41% reported the same about the environmental impact of investments, while over 40% of advisers explicitly consider ESG factors as part of their fund selection process.

“As concern has built in 2019 about the ongoing climate emergency, our survey suggests that awareness of ESG factors among investors is rising and is fuelling conversations with advisers.”

Finally, just over 90% of advisers report that 0-25% of their clients currently specify that their investments should reflect ESG factors in some way.

Philip Middleton, Head of UK Intermediary, Schroders, commented: “As we saw in the 2018 survey, the uncertainty of Brexit remains a prevailing concern for investors. However, this year’s data gives us reason to be cautiously optimistic on the outlook for the UK. Whilst 40% of investors have moved out of UK assets, capital looks set to be deployed back into UK equities with 41% of advisers expecting to increase allocations in the next 12 months.

“As concern has built in 2019 about the ongoing climate emergency, our survey suggests that awareness of ESG factors among investors is rising and is fuelling conversations with advisers.

“We are pleased to see that 43% of advisers consider ESG factors in their fund selection process as ESG continues to grow in importance. With advisers expecting continued and increased disruption caused by environmental changes, technological advancements and geopolitical challenges, 66% expect market volatility to increase.”