Advisers adjusting client portfolios as bearish sentiment rises

Financial advisers are actively adjusting their clients’ portfolios as investor sentiment becomes increasingly bearish, according to a study from Schroders.

Its UK Financial Adviser Pulse Survey 2026 found that more than half (51 per cent) of advisers were actively adjusting portfolios, focusing on defensive repositions as 28 per cent move into cash.

Almost two fifths (39 per cent) of advisers reported bearish clients and 17 per cent reported bullish clients, compared to 25 per cent and 28 per cent in November 2025 respectively.

In response, advisers were broadening allocations, with 44 per cent exploring alternatives such as gold, active exchange-traded funds (ETF), and long-term asset funds (LTAF).

Capital loss was the top concern shaping client sentiment, cited by 36 per cent of advisers, followed by geopolitical risk (32 per cent) and tax (16 per cent).

Tax worries were being driven by pensions coming into the scope of inheritance tax (IHT) from April 2027, with 99 per cent of advisers saying clients were at least slightly concerned, including 52 per cent who said they were very concerned.

Nearly a third (31 per cent) of advisers expected more than half of their client base to require estate-planning changes as a result of the IHT reform.

Schroders also highlighted that advisers were responding to heightened market volatility by increasing active allocations.

Almost a quarter (23 per cent) had already increased active allocations in response to market volatility, compared to 9 per cent moving further towards passive strategies.

The same proportion (23 per cent) reported greater client demand for higher-income investments.

This comes amid shifting economic and market expectations, with 65 per cent of advisers anticipating higher inflation over the next five years, up from 31 per cent in November 2025, while 46 per cent expected higher interest rates versus 17 per cent expecting lower.

Although geopolitical disruption expectations had rebounded to 66 per cent, they remained below the 77 per cent peak this time last year.

Despite these concerns, adviser confidence in business prospects remained strong, with 83 per cent expecting their client base to grow over the next 12 months.

Tax and estate planning was found to be the leading growth opportunity over the next two to three years.

However, advisers continued to highlight structural barriers to serving smaller clients, as 88 per cent felt regulatory and cost pressures made it harder to serve lower-value clients.

This has led to a quarter of advisers actively segmenting and off-boarding some clients.

Artificial intelligence (AI) adoption continued to accelerate, with 51 per cent of advisers using AI tools within their advice process, up from 21 per cent in November 2024, and 24 per cent expected to incorporate AI within the next 12 months.

“This year’s Pulse Survey captures a clear focus from advisers on building resilience into client portfolios as they respond to higher volatility, while highlighting the power of active management in navigating more complex markets,” said Schroders head of UK wealth, Jamie Fowler.

“It is also encouraging to see that a growing share are open to increasing their use of newer vehicles as part of a broader diversification toolkit.

“At the same time, the level of client concern around tax and estate planning reinforces the importance of advice and the value it brings in supporting long-term financial planning and providing peace of mind.”

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