“The capital loss remains the biggest fear of investors”
The survey, which was completed by 161 advisers in May 2021, revealed a much more optimistic attitude in the industry unlike the results of the previous survey released in November 2020.
The results suggest that investment sentiment among clients shifted positively to a 52% bullish sentiment, with 10% of clients reporting bearish sentiment.
Schroders Chief Investment Officer Alex Funk said: “The volatility is there and the politics are not going away. Considering how long we’ve been taking this pulse check, I think the sentiment may have changed a bit. Thinking of customer concerns, Covid has been a time of absolute distress as the initial fear was a loss of capital.
“Capital loss will remain an investment concern throughout time, no matter what stage of the market cycle we find ourselves in. However, concern about capital loss has diminished on a relative basis, and d other concerns came to the fore in terms of loss of income. “
He added that the commodities crisis and inflation weighed on investor sentiment, heightening concerns about the loss of capital.
Some 79% of clients fear a loss of capital, according to the survey of advisers, while the second concern remains the impact on their retirement plans, with 71% of them aligned on this point.
Rising taxes were a concern for about half (53%) of clients.
When asked what will change over the next five years, UK growth was highlighted as a topical factor, with 81% of advisers revealing growth expectations in this area.
Interest rates and inflation have also remained relevant: 80% of investors expect inflation to rise and 49% expect higher interest rates.
“Most investors will continue to believe that there is only one way for rates to go from here, and this tends to be on an upward trajectory. In terms of bonds, I am asked to What are these things for in the portfolio on a daily basis with investors saying we should sell all the government bonds in our portfolio, ”Funk added.
Market sentiment was more positive in May when the UK government lifted most anti-Covid measures, while Western economies began to open up again.
However, Funk expects an upward trend in volatility with the Delta variant still present just before the start of the winter season.
Unique Financial Planning co-founder Philip Martin said: “The market has clearly been buoyant for much of the foreclosure period, and it seems almost counterintuitive when retail spending has fallen as much as they did and that cash deposits are increasing, but it kept on a reasonably upward trajectory, meaning that there is a general positivity of customers towards the market.
“Clients are definitely reinvesting, but I think there are fears as cash stocks are increasing. With interest rates and inflation at their current levels, there is a negative real return and as a result, destructive of value if excessive amounts above a security buffer are held in cash. However, there are several things at stake besides the fear of volatility in the market. This is everyone’s job. advisers in this country to explain that there is as much downside risk in having too much liquidity as there is a balance against market volatility. “
Funk also said the effects of Brexit were being fueled by those of the pandemic, making it difficult for European citizens to come to the UK to do all the work they were doing before the Covid travel measures.
Gillian Hepburn, UK Intermediate Solutions Manager at Schroders, said: “During the initial period of the lockdown, advisers spent a lot of time working with clients to manage their emotions and help them stay engaged throughout. by spending less time finding new clients. Moving into this year, advisors had more time to devote to attracting new clients. “