Concerns grow amongst advisers as cost of living hits savings

by | Nov 14, 2022

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The latest Embark Investor Confidence Barometer*has taken the pulse of the industry and uncovered that advisers are pessimistic about the impact that the higher cost of living could have on their clients’ savings. Investors are also concerned, albeit they are not quite as pessimistic as advisers.

Advisers clearly anticipate that savings could take a hit as a result of ongoing economic turbulence. Almost half (51%**) of advisers surveyed say that as a result of the current cost of living the majority of their clients will be forced to adjust contributions or sell investments to meet their retirement plans. Only 25% of advisers believe that the majority of their clients will be unaffected.

The Barometer found that 53% of surveyed advisers have seen an increase in the number of people seeking advice as a direct result of them recognising that their savings must do more. This is a strong signal that investors, aware of increasing economic pressures, are seeing the value of financial advice.

A majority of investors are worried about the impact of inflation on their ability to save and maintain their standard of living. The Barometer reveals some investors have already made the decision to sell investments or cut back contributions. 29% of advised and 28% of non-advised consumers surveyed have reduced or will reduce the amount they save into GIAs and ISAs. Encouragingly, fewer investors (14% of advised and 10% of non-advised investors surveyed) are prepared to reduce their pension contributions.

When it comes to advisers’ tactics in dealing with the impact of inflation, it is reassuring that 91% of surveyed advisers have introduced inflation modelling into their advice process. Indeed, the fact that 66% have done so in the last two years suggests that advisers are reacting to an economic regime change from low inflation to stickier inflation and higher rates. The benefits of advice are also evident in the finding that twice as many advised as non-advised consumers surveyed (28% versus 13%) have changed their strategy to target a higher inflation-adjusted return. Since the pandemic, around 1 in 3 advised clients have discussed inflation protection via inflation-linked bonds and commodities with their adviser. However, these numbers suggest there is still scope for advisers to have inflation-focused client reviews.

Commenting on the findings, Jackie Leiper, CEO, Embark Group said: “This is a challenging time for investors looking to strike a balance between protecting long-term savings and investments whilst maintaining living standards, at a time when household costs are rising steeply. Each household will have different circumstances and therefore may need an individual solution and clients will be looking to their advisers to guide them through the options available.

“The critical thing is to have conversations early to discuss the options and agree a plan. By reviewing the full financial picture, advisers can help clients maximise the most tax-efficient options and consider the timing of any essential sell downs.”

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