Embark Investor Confidence Barometer

Challenging times for retirement & investment confidence

Investors turn more bearish on stock markets
But advisers turn more bullish as markets correct
Retirement confidence dips, but advised clients more confident than non-advised

Investment confidence diverges

Our latest Barometer reveals an interesting divergence between adviser and investor confidence. After a torrid time between surveys, investor confidence has taken a significant knock. Advised clients are much less bullish, with those expecting a rise in equities in the next 12 months falling to 40% from 61%. Non-advised investors are more bearish – only 30% expecting a rise, down from 48%.

These declines are understandable given how equity and bond markets have fallen this year against a relentlessly gloomy news-flow dominated by rising interest rates, the war in Ukraine, and rising energy and food prices. Indeed, the news is a very important influence on investor psychology. When asked if the news influences their investment decisions, 54% of advised clients and 51% of non-advised investors agreed that it did. Younger investors were more easily influenced than older investors.

What may be surprising is that adviser confidence has moved in the opposite direction to investors, as stock markets have corrected. The percentage of advisers predicting a rise over the next 12 months increased to 62% from 57%. Similarly, adviser confidence for a rise in markets over five years moved up to 63% (from 55%) and over ten years to 67% (from 47%). Why might this be?

Well, advisers are experienced enough to know that corrections have historically been a good time to enter the market. Advisers are also less likely to be influenced by the news, knowing that markets typically bottom when it’s most gloomy. Interestingly, this contrarian philosophy appears to be influencing their clients. The fact that 52% of advised clients believe that ‘market corrections are a good time to buy’ compared to only 42% of non-advised investors underlines the strength of the adviser-client relationship in promoting what history has shown to be sensible long-term investing behaviours.

Retirement confidence dips, but benefits of advice still shine through

It is not surprising to see retirement confidence levels dip since our last Barometer. The percentage of investors who are confident they will be able to achieve their retirement plans has fallen from 78% to 72% for advised clients and from 63% to 57% for non-advised. We have also seen a large drop in how confident investors are that there will be no unforeseen need to withdraw significant money. These declines are likely to be a function of the higher levels of uncertainty created by more volatile markets and rises in the cost of living.

There is still a notable difference in retirement readiness between investors who seek advice and those who go it alone. Advised consumers are 15 percentage points more confident than non-advised investors about achieving their retirement plans, 17 percentage points clearer on how much money they need to retire and 18 percentage points more confident that there will be no unforeseen need to withdraw significant money. These results point strongly to the benefits of financial advice.

“It has been a challenging year for investors, but this is the time when the benefits of having an adviser come to the fore and we see that clearly in these results. Advised clients have greater clarity on how much money they need to retire than non-advised investors, and they have greater confidence that they will achieve their retirement plans.

Advised client investment confidence has also held up relatively better and, thanks to the experience of their advisers, advised clients are more likely to take advantage of the more reasonable stock valuations that market corrections create. This speaks to the work that advisers do to prepare their clients for market drawdowns and ensure they have the willpower to stay the course with their investments.”

Ranila Ravi-Burslem
Intermediary Distribution Director, Embark Group