Pandemic deals blow to unadvised investor confidence, with retirement confidence worryingly low

The Embark Investor Confidence Barometer has taken the pulse of UK investors and advisers, and found that people without a financial adviser have sustained a sharp fall in confidence since the pandemic, putting their wealth at risk.

Prior to the pandemic, 70% of unadvised investors were confident* they could deliver their financial plans without an adviser. However, since then it has dropped to 60%, with one in five (20%) unadvised investors now not confident** about delivering their financial plans (up from 8% prior to the pandemic).

The research, conducted by Censuswide on behalf of Embark Group (Embark), an award-winning full-scale UK retirement solutions provider, revealed that only 46% of unadvised investors are confident* they will not be significantly financially worse off at the end of the pandemic, compared to just under two-thirds (62%) of advised consumers.

The impact of advice on investor confidence was starkly exposed during the stock market crash between February and April 2020. Only 43% of investors without an adviser were confident* in their investment approach during this period, whereas for those individuals with an adviser this was substantially higher at 65%.

Confidence has been found to have marked impacts on investment behaviours and outcomes, with emotionally-led decisions costing investors on average 3% per year pre-Covid, based on research by Oxford Risk, a behavioural finance technology provider.

During periods of high stress, investor losses can rise to about 6 or 7% a year from emotionally-guided investment decisions. The research found that investors increasing their cash holdings due to uncertainty is a principle cause of investment ‘own goals’, costing them 4 to 5% in investment returns a year over the long-term.

Commenting on these findings, Greg Davies, Head of Behavioural Science at Oxford Risk, said: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.”

Amongst advised investors, over a quarter (26%) are much more confident that they will achieve their long-term financial objectives than before the Covid-19 pandemic began, with only 8% feeling less confident***.

However, there was a notable difference between the confidence displayed by advised investors and financial advisers themselves, who are much more cautious than their clients about the impact of Covid-19 on their long-term financial prospects. Advisers think on average that only 39% of clients’ general financial situation won’t be worse off following the pandemic, and similarly that only 39% of clients will be financially unaffected by it in retirement.

Able to meet retirement plans?

Across both advised and unadvised investors, the Barometer found a worrying lack of confidence in the likelihood of having enough money to meet retirement plans:

  • Only 24% of advised investors are very confident (36% somewhat confident) that they will have enough money to meet their retirement plans, dropping to 18% of unadvised investors (36% somewhat confident).
  • Only 12% of unadvised investors are very confident (31% somewhat confident) that their investment portfolio will grow sufficiently to provide the money to meet their needs post retirement, significantly lower than investors with an adviser (25% very confident, 38% somewhat confident).
  • Financial advisers think that only just over a third (37%) of their clients will have enough money to fund their retirement plans.

Seeking advice earlier?

The change in confidence amongst unadvised investors has caused a significant re-evaluation of their use of financial advisers, with one in three (33%) having considered seeking advice since the Covid-19 crisis began.

The report further found that younger investors are more likely to seek advice than older individuals, and have different demands surrounding the nature of advice:

  • Almost half (49%) of the 35-44-year-olds surveyed without an adviser were considering seeking advice, compared with 21% of 55-64 year-olds.
  • 44% of investors aged 35-44 with a financial adviser said advisers’ availability for ad-hoc advice was ‘very valuable’ (versus 35% of investors aged 55-64).

Phil Bungey, Chief Operating Officer, Advance by Embark, added: “Our Barometer has shown that investors with an adviser have greater confidence in their ability to retire when they want and to be financially secure in retirement. It’s clear that a key differential is the role that advisers play in the management of their clients’ investment portfolios and the confidence that this brings.

“The ability of financial advisers to instil that confidence is a valuable attribute, particularly given the uncertain times that we are living through. It is an encouraging sign that many unadvised investors are considering seeking financial advice, and that, in particular, younger investors are looking to ensure they are as prepared for the future as possible.”

This is the first iteration of the Embark Investor Confidence Barometer in what will be a wide-ranging 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 (further details below).

To access the full Embark Investor Confidence Barometer, go to:

Barometer survey details

The Embark Investor Confidence Barometer surveyed the following groups:

  • 250 advised consumers (those that have a financial adviser) with a minimum of £100k investible assets, who have a pension and are aged 35-70
  • 502 unadvised consumers (those that do not have a financial adviser) with a minimum of £100k investible assets, who have a pension and are aged 35-70
  • 250 financial advisers (aged 18+) who have clients and whose company/firm has assets of less than £500 million

Fieldwork was carried out between 3rd–11th November 2020. Censuswide abides by and employs members of the Market Research Society which is based on the ESOMAR principles.

Editors’ notes

*’Very confident’ and ‘Somewhat confident’ responses combined.

**’Not very confident’ and ‘Not confident at all’ responses combined.

***’Slightly less confident’ and ‘Much less confident’ responses combined.

For further information, please contact:

Quintin Keanie

The Agency Partnership (Embark Media Relations)

Email: [email protected]

Tel: 07880 602902

About Embark Group

Embark Group is a full-scale UK retirement solutions provider, active in the areas of Investment Platform, SIPP, SSAS, Multi-Asset Funds, Fund Research and Employee Benefits Consulting. The Group trades under the brands Embark, Rowanmoor, Vested and The Adviser Centre. It also operates a wide portfolio of white label services for business such as RBS Coutts, Standard Life, Nutmeg, BestInvest, Charles Stanley, Moneyfarm and Wealthsimple. Businesses within the Embark Group have been established in the market for more than 40 years and have a long history of working closely with intermediary distribution partners and consumers of all levels of affluence.

The Group has more than £38bn in assets under administration on behalf of c415,000 consumer clients, operating across eight UK locations (London, Bolton, Dundee, Edinburgh, Leeds, Leicester, Salisbury and Swindon). Embark has been recognised as one of the most innovative Wealth Tech companies in 2019 and 2020.

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