By Fiona Nicholson
A global survey has revealed that 69% of investors are upbeat about their finances, according to Natixis Investment Managers.
This figure rises to 73% for UK investors.
The survey, which assessed the views of over 8,000 individual investors with more than $100,000 (£78,000, €92,000) in investable assets, also revealed that UK investors are expecting to make returns of 9.3% above inflation this year, higher than the global average expectations of 8.6%.
It also found that over the longer term, individual investors expect 13% returns above inflation.
Despite last year’s economic downturn, respondents globally said they generated positive returns of 1.9% on average.
Investors in the UK came closest to a loss, reporting they generated an average positive return of just 0.6%.
The report also showed that most investors anticipate a return to the bull market that delivered average annual total returns of 14.6% from the S&P between 2012 and 2021, including gains of 30% in 2019, 18% in 2020 and 28% in 2021.
Biggest financial fears
While investors globally reported feeling confident despite the changing economic backdrop, nearly two-thirds (62%) said that higher everyday costs are their biggest financial fear, rising to 71% among UK investors.
Almost half (43%) of UK investors said that a large, unexpected expense is a big concern, while 29% said that one of their biggest financial fears is a tax increase. Despite recession concerns, only 18% are afraid they will lose their job.
Darren Pilbeam, head of UK sales at Natixis IM, said: “Volatility and inflation are certainly impacting investors’ short-term outlook but longer term they are more optimistic about returns and their capacity to save for retirement. Central to achieving their goals will be working with trusted financial advisers, and the survey confirms that over half of UK investors still recognise the important role an adviser provides in navigating financial markets.
“The findings also reaffirm the importance of including active management to deliver returns and the importance of investors understanding the role different asset classes can play in delivering diversification and performance to a long-term investment portfolio.”
Concerns and risks
The survey also revealed that for 60% of UK investors, inflation is the top investment concern, and that 53% believe it is significantly impacting their ability to save for retirement.
More than half (53%) said they need to invest more to make up for inflation and 70% explained that rising costs have made them realise they must save more money, yet 42% admitted that they aren’t saving more.
After inflation, 47% see a recession as the biggest risk to their portfolio. Over a third (34%) pointed to market volatility and 27% said rising rates was the biggest threat to their investments.
Almost half (47%) of investors globally said they have more confidence in bonds to outperform in 2023, than equities compared to just 30% in the UK. In the UK, 25% of investors plan to increase their bond investments in response to rising rates – a much lower figure than the 46% globally who are increasing investments in bonds.
Gap in knowledge
However, while four-in-ten (42%) of UK investors say they understand the role of bonds in portfolios and the impact of rising rates on bonds (40%), when asked questions about what happens to bonds in a rising rates environment, only a small number of investors could provide the correct answers, 27% selected one correct answer and 54% stated that they did not know.
Furthermore, 59% of UK investors recognised that index funds provide returns that are comparable to the market, while 61% assumed index funds will help them minimise losses, and 56% made the assumption that index funds are less risky than other investments.
More than a quarter (29%) of UK investors defined risk as exposing their assets to volatility and 30% defined it as losing wealth. Only 8% viewed risk in terms of failing to meet their long-term financial goals, compared with 24% of financial advisers.
What investors want from advisers
While recent inflation has highlighted the importance of financial advice for 55% of UK respondents, only 31% said they need professional advice for investments.
When asked what advice services interest them the most, retirement income planning and financial planning came out on top, at 54% and 39% respectively.
Some 29% of UK investors also said they want their adviser to offer them tax-efficient investment strategies, 26% highlighted sustainable investments and 23% were looking for private investment opportunities.
This story originated on our sister title, International Adviser.
