Your IndustryAug 4 2015

Investors play it safer as market volatility increases

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Investors play it safer as market volatility increases

Investor risk tolerance has shifted towards lower/mid profiles to the detriment of the mid/upper range risk profiles relative to last year, according to statistics drawn from Distribution Technology’s Dynamic Planner tool.

The annual report provides a summary of all 136,440 recommendations made within Dynamic Planner over the 12 months to end of July, and showed that for both investment and retirement, risk profile five (low to medium risk) is the most often selected.

The average risk profile was 5.13, representing the second lowest level seen over the last four rolling one year periods.

Jim Henning, principal consultant at Distribution Technology, blamed increasing geopolitical risks and general market volatility.

“We will watch with interest the forthcoming quarter reports to see if the investment climate settles and whether this marginal reduction in risk appetite continues,” he added.

Retirement planning risk profiles are skewed higher compared to investment, reflecting the longer term outlook and the benefit of pound cost averaging via regular contributions.

For lump sum investment there is a clear relative preference for risk profiles three (low risk) and four (lowest medium risk), compared to the pension equivalent.

Other than risk profiles, the figures also showed that the largest proportion of advice was placed within the 60 to 64 year age bracket. Overall, 72.5 per cent of males profiled were aged 50 years or over, while for females it was 74.4 per cent.

As part of the Dynamic Planner fact finding process, advisers are prompted to record the level of investment experience for an individual. Of the 12,044 respondents to this question, only 10 per cent were recorded as first time investors.

peter.walker@ft.com