A third of clients more risk averse post-pandemic

by | Nov 23, 2021

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  • A third (33%) of advised individuals want less investment risk than they did before the UK went into lockdown.
  • However, a quarter (27%) said they want more risk, with both groups citing capacity for loss as a contributing factor. 
  • Half (50%) of those that are happy to take on more risk also cited greater confidence in the advice they receive.

The coronavirus pandemic has made a third of people that receive financial advice more risk averse, as capacity for loss becomes a bigger factor in investment decisions, according to new research from abrdn.

A third (33%) of 1,000 advised individuals polled by abrdn said they now want to take less risk with their investments than they did before the UK first entered lockdown in March 2020.

When asked why their risk appetite was lower, half (51%) pointed to a change in their investment or financial priorities and two in five (42%) cited a reduced capacity to absorb loss.

This compares to just over a quarter (27%) of advised individuals who now want to take on greater investment risk. Half (50%) of this group said they are happy with more risk because they feel more confident in the advice they receive, while more than two fifths (42%) said their capacity for loss had increased.

 

Alastair Black, Head of Industry Change at abrdn, said: “Seismic events like Covid-19 can cause big shifts in investor risk appetite. However, the divide we’ve identified between those who now want less risk and those who want more is considerably more significant than we expected. It confirms the uneven financial impact of the pandemic, and the challenge advisers are currently facing to support clients with very different outlooks.

“The research also underlines the link between capacity for loss and investment risk, and how the former is having an even a bigger effect on client decision making in the wake of the pandemic. This comes almost five years after the FCA said advisers must consider capacity for loss during suitability assessments, both separately from, and in addition to, attitude to investment risk.

“Looking ahead, it’s encouraging to see those that are happy to take on more risk cite confidence in their adviser. This shows how invaluable advice has been during such a turbulent financial period, and the value advisers will continue to deliver as clients shape their portfolios as the UK’s enters a new phase of its post-pandemic recovery.”

 

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