INVESTMENT FUNDS: High-net-worths driving demand for onshore bonds.

As published on ftadviser.com, Thursday 10 March, 2022.

High-net-worth clients are pushing the ongoing growth for onshore bonds, according to a survey of advisers.

Two in five wealth advisers (44 per cent) believe HNW clients are driving the demand for bonds, ahead of traditional sectors such as income seekers, according to HSBC Life’s bonds pulse survey.

The survey showed that 36 per cent of advisers say onshore bonds (issued within the UK and subject to tax) are the most suitable asset for clients who are five years from retirement.

A further quarter (26 per cent) believe they are most suitable for clients looking for income or seeking to mitigate inheritance tax.

Mark Lambert, head of onshore distribution at HSBC Life UK, said onshore bonds are increasingly viewed as being suitable for a wider range of clients.

“Traditionally, demand for bonds is driven by the three I’s of investment, income and inheritance,” he said.

He added he sees the growth in demand for onshore bonds continuing as advisers re-evaluate the investment and financial planning solutions provided by the assets, especially while the current caps are in place on investment limits for pensions and Isas.

The research, undertaken by PureProfile, surveyed 100 UK-based wealth management advisers between September 22 and 29.

Wealth advisers also indicated they are focused on financial strength and trusted providers when selecting onshore bonds to recommend to clients, with 63 per cent selecting ‘financial strength’ as the key consideration for choosing a provider, with 44 per cent selecting ‘trust’.

Other key considerations selected include breadth of fund choice, adviser support, availability on platforms, brand name and ESG fund choice.

When asked about their biggest concerns regarding returns from asset classes, 48 per cent expressed concern about a global recession within the next five years, 39 per cent highlighted the risk of inflation, and 43 per cent pointed to possible market corrections and concerns about equities being over-valued.