Growing gaps between advisers and investors over confidence in retirement and equities

by | Oct 31, 2022

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The latest Embark Investor Confidence Barometer – a twice-yearly survey of advisers, advised consumers and non-advised consumers – has revealed that the gap in confidence between advisers and investors for both retirement prospects and equity investments has grown since March 2022. The results reflect recent market volatility but also point strongly towards the benefits of advice.

In the previous Barometer, over a third (34%) of advisers surveyed were confident that the majority of their clients would meet their retirement goals- this has fallen to a quarter (25%). Between surveys, advised investors’ confidence in that they would meet their retirement plans fell from 78% to 72%. Clearly, advisers have become more pessimistic about their client’s retirement prospects at a much faster rate than their clients.

This is juxtaposed to equity investment confidence, with advisers significantly more bullish about equities than advised investors. In the previous Barometer, 57% of surveyed advisers expected a net rise in equities in 12 months from March 2022. This figure fell to 47% looking ahead over a ten-year period. However, in this most recent survey, advisers have become significantly more bullish; 62% of those surveyed expected a net rise over the next 12 months, with this figure rising to 67% over a ten-year time frame.

Investors, in contrast, are much less bullish. Whilst in the previous survey 61% of advised investors expected a rise in equities in the next 12 months, just 40% felt the same this time around. Non-advised investors are even more bearish, with just 30% expecting a rise, down from last time’s 48%.

Whilst it’s not surprising to see confidence decrease given the macroeconomic context, the question of what lies behind these widening gaps remains. Previous surveys have suggested communication challenges as a reason for the disparity in confidence. Some advisers certainly agree with this suggestion, with 42% of those surveyed this time agreeing that difficulty communicating with some clients was the reason for the gap.

In reality, the picture appears more complex. 84% of advised investors surveyed said they were satisfied with their adviser’s communication, with just over half (51%) saying that they were very satisfied. Similarly, 85% of advised clients were satisfied with their adviser’s ability to understand their needs. This gap may indicate that although clients are satisfied, advisers may need to take a more structured approach to confirm their communications are understood. There are also other factors; 40% of advisers surveyed said unrealistic client expectations on investment performance may be a reason for the confidence gap and 39% suggested it may be due to unrealistic client expectations on what financial advice can deliver.

The contrasting perceptions of advisers and investors does indicate the value of advice, as evidenced by the bearishness of non-advised investors compared with their advised counterparts. Equipped with experience, and knowledge of historical market trends, advisers are less likely to be influenced by the news and, during times of market volatility, can help clients stay the course to achieve the best outcomes. It is no wonder that 70% of surveyed advised investors agreed that their adviser helps them keep their emotions out of investing.

This underlines the importance of the adviser-client relationship in promoting what has traditionally been proven to be sensible long-term investing behaviour. The fact that 52% of surveyed advised clients agreed that current market corrections are a good time to buy, compared to just 42% of non-advised investors is further evidence to support this point.

Ranila Ravi-Burslem, Intermediary Distribution Director at Embark, said: “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 unadvised 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 current market corrections create. This is a testament 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.”

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