Product innovation in the investment market is nothing new, but the changes in pension rules and regulation reforms such as the Retail Distribution Review (RDR), are providing investors with a wider variety of vehicles to meet their specific needs.
The pension reforms in particular are likely to drive both a whole new set of investor demands, primarily for income.
Ben Willis, investment manager and head of research at Whitechurch Securities, says: “In terms of the RDR, the biggest impact has been on transparency of fees and charges. Now that the end investor/client is able to see all fees and costs, there has been a significant drive to reduce margins by the industry. This has led to the increase in passive and/or quant-led investments, as these generally have lower charges than their actively managed counterparts.
“As such, in light of the pension reforms, we will see a number of new products/funds come to market that will target both risk and specific outcomes, whether this is via multi-asset or by an absolute return mandate.”
Ben Seager-Scott, director of investment strategy at Bestinvest, adds that the pension changes could make income-yielding products more attractive and may well have an impact on the type of wrappers that pension companies offer, as well as increase demand for income-yielding products.
“However, this is against the years-old backdrop now of very low interest rates,” he notes.
Jasper Berens, head of UK funds at JP Morgan Asset Management, however, points out that with greater flexibility comes greater challenges for retirement investors.
“Advisers will need to be poised to help clients navigate their options in the new investment landscape. They need to carefully manage risk to prevent the potential loss of future wealth, whilst at the same time accessing competitive market returns to grow their assets to sustain their lifestyles through retirement.
“There is a desire for solutions able to provide compelling risk-adjusted returns, balancing the provision of sustainable income and management of downside risk.”
Mr Willis agrees income will remain “the key focus” for investors in the future.
“It will be income-focused investment vehicles that will be marketed.”
Nyree Stewart is features editor at Investment Adviser
