People without a financial adviser have lost their confidence since the Covid-19 pandemic, putting their wealth and retirement plans at risk – according to the Embark Investor Confidence Barometer.
Prior to the virus upheaval, 70 per cent of unadvised investors were confident they could deliver their financial plans without an adviser but that figure has since fallen to 60 per cent. One in five unadvised investors (20 per cent) are now not confident about delivering their financial plans – up from eight per cent prior to the pandemic.
Less than half (46 per cent) of unadvised investors are confident they will not be significantly financially worse off at the end of the pandemic, compared to 62 per cent of advised consumers.
The research, conducted by Censuswide on behalf of retirement solutions provider Embark Group, also identified that forty-three per cent of investors without an adviser were confident in their investment approach during this period. For individuals with an adviser this figure rose to 65 per cent.
Among advised investors, over a quarter are much more confident that they will achieve their long-term financial objectives than before the Covid-19 pandemic began, with only eight per cent feeling less confident.
Confidence can have marked impacts on investment behaviours and outcomes, says Oxford Risk, a behavioural finance technology provider. It says that during periods of high stress, investor losses can rise from three per cent to six or seven per cent a year from emotionally-guided investment decisions.
Greg Davies, head of behavioural science at Oxford Risk, comments: “Times of stress can be very costly for investors. Decision horizons shorten, the emotional component of decisions increases, and we cling to the decisions that feel comfortable in the moment rather than those that are sensible for our long-term needs.
“To overcome this, investors need to maintain a state of calm, and keep their focus on the long-term, which can be difficult to do in the face of rapidly moving events and a barrage of daily news. One of the key values of advisers is helping investors navigate the storm and avoid knee-jerk responses, providing both experience and emotional calm. We see from these data how advisers can provide the confidence investors need to stick to their plans.”
Interestingly, advisers themselves think on average that only 39 per cent of clients’ general financial situation won’t be worse off following the pandemic, and similarly that only 39 per cent of clients will be financially unaffected by it in retirement. However, financial advisers think that only just over a third of their clients will have enough money to fund their retirement plans.
In addition, the report also found that younger investors are more likely to seek advice than older individuals, and have different criteria for seeking advice. Forty-four per cent of investors aged 35 to 44 with a financial adviser described advisers’ availability for ad-hoc advice as ‘very valuable’ – versus 35 per cent of investors aged 55 to 64.
The Embark Investor Confidence Barometer is a new bi-annual attitude tracker exploring the confidence of investors and advisers in the UK, across a range of topical issues. Censuswide conducted the survey of 1,002 respondents in November 2020.