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The survey, which canvassed more than 600 private investors and IFAs, concluded that this failure to diversify - coupled with slow or inappropriate responses to the financial crisis - had led to a "significant deterioration" in wealth among private investors.

The report cited the breakdown in communications and general lack of understanding between investors and financial advisers as the main reason for this deterioration, leaving portfolios "ill-equipped for a crisis" and "overly exposed to higher-risk assets".

The report also found that one in five private investors have lost more than a quarter of their wealth over the past 24 months and that half has lost more than 16 per cent. 42

Further, more than 40 per cent of private investors surveyed said they disagreed with the advice they were given, or felt their advisors were too slow to respond to the challenges of the financial crisis.

Marcus Grubb, managing director of investment research marketing at the World Gold Council, said: "A greater understanding of diversification is needed to ensure that, irrespective of market conditions, an investor's portfolio has the necessary defences to ride out the fiercest of economic storms.

"Many IFAs, investors and commentators have characterised the wealth destruction we have seen over the past 24 months as representing a failure of diversification due to poor performance across almost all asset classes.

"However, our research points more to a failure to diversify adequately - investors were simply not advised to invest in those assets with the best diversification properties."

According to the World Gold Council, the survey's "most worrying" finding was the "significant dislocation" in the investment objectives of private investors and the focus of IFA advice.

In a statement, it said: "Fifty per cent of investors have historically given more weight to a 'capital preservation' strategy, a view not reflected in the advisor base, who say - two to one - that their emphasis prior to the financial crisis was on capital appreciation."