A new survey of financial advisers suggests that nearly seven in 10 plan to increase their use of smoothed funds over the next year due to increased volatility in world financial markets and client concerns about investment returns.
One in five advisers believe that market volatility will results in half of their clients changing their retirement plans.
The survey found that current market volatility was “testing” client confidence.
The survey of 300 advisers was carried out by mutual provider Wesleyan in July to assess adviser attitudes to investing over the next year.
The survey found:
- 69% of advisers expect to increase their use of smoothed funds over the next year
- 65% have already increased their use during the past 12 months
- 88% say recent volatility has made smoothed funds more suitable for certain clients
- One in five expects market uncertainty to change the retirement plans of more than half of their clients approaching retirement
The survey of 300 UK financial advisers found that nearly two thirds (65%) have increased their use of smoothed funds during the past year.
The findings point to a wider shift in adviser thinking, says Wesleyan. Almost all advisers surveyed (94%) agreed that investment solutions must evolve in response to changing market conditions. Two fifths (39%) believe volatility poses a significant threat to their clients’ investment outcomes, while 55% consider the threat to be low. Only 3% see no threat.
Smoothed funds are provided by a number of firms including Wesleyan, Fidelity and Standard Life. They aim to smooth out investment peaks and troughs by investing in a variety of assets including equities, fixed interest and cash. They often keep back surplus returns in good years to add to performance in weaker years, providing a "smoothing" effect to investment returns.
James Stacey, investment specialist at Wesleyan Financial Services, said: “Volatility is no longer being viewed simply as a short-term disruption. Advisers increasingly need to consider how periods of uncertainty affect not only investment values, but also clients’ confidence and financial decisions.
“For some clients, particularly those investing for the first time or approaching retirement, sharp market movements can make it harder to remain invested. Smoothing can help manage the investment journey and reduce the impact of short-term market movements, although it does not remove investment risk or guarantee returns.”
Wesleyan says retirement planning is a particular concern. One in five advisers (21%) expects more than half of their clients approaching retirement to postpone or change their plans because of market movements during the remainder of the year.
Among advisers who have increased their use of smoothed funds, the most commonly cited reasons were managing volatility arising from UK political uncertainty (43%), global geopolitical uncertainty (41%) and helping clients remain invested during unsettled markets (39%).
However, advisers still see obstacles to wider adoption. These include cost (36%), regulatory concerns (34%), performance concerns (33%) and product complexity (32%).
Mr Stacey added: “The findings don’t suggest smoothing is right for every investor. They show that advisers increasingly see it as one option within a broader investment toolkit."
Wesleyan is a mutual financial services provider founded in Birmingham in 1841, where it is still based. It had £7.6 billion of assets under management as at 31 December 2024
• The research was conducted among 300 regulated UK-based financial advisers. Fieldwork was completed in July 2026.