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Advisers warned over public’s grasp of balanced funds

Advisers must address a lack of consumer understanding over balanced managed funds and their high level of equity exposure, warns Royal London head of communications Alasdair Buchanan.

He says that 80 per cent of company pension schemes have a balanced managed fund as their default option.

Buchanan says that, on average, 80 per cent of a balanced managed fund is invested in equities, with fixed income making up about 20 per cent and property usually around 1 per cent.

He says the name balanced managed suggests to clients that the fund is equally split between the three asset classes and that consumers will assume that they are fairly protected in the current volatile market when, in fact, they have high exposure.

He says: “Individuals will be sitting there thinking that their fund is safe. The asset split does not really reflect their understanding of a balanced managed fund. They are going to give grief to someone. The volatile markets means that this is becoming more of an issue. There is a serious risk here for advisers, employers, the trustees and providers.”



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