InvestmentsNov 21 2016

Wealthy investors have 'limited regard' for advice

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Wealthy investors have 'limited regard' for advice

According to a report from Cerulli Associates, 60 per cent of affluent investors in the UK are either ‘fairly’ or ‘very’ confident in their ability to adopt a DIY approach to investing.

Cerulli surveyed 1,000 investors with at least €200,000 (£172,500) of investable assets.

Barbara Wall, managing director at Cerulli, said: "In practice, investors might not have the time to build and monitor a portfolio and they do not necessarily believe that they could do so better than their advisers. 

“Nevertheless, they feel that they could get by with a minimum level of guidance.” 

The research, called European Investor Segmentation 2016: Building Bridges with Clients, found investors in both Germany and Switzerland had similar levels of confidence when it came to creating their own investment portfolios.

Ms Wall said: "The high confidence among investors in sophisticated markets reflects the level of financial education in Europe; it also suggests that investors in these countries might have a limited regard for professional advice."

She also pointed out that investors' willingness to construct their own portfolios could reflect the nature of the sample, as wealthier investors tend to be more financially literate than the average person.

The culture and education level of the British investor is compatible with the robo-advice business model Angelos Gousios

Robo-advice is also increasingly popular with European investors, and the UK has the largest and most developed robo-advice market in Europe.

The report found 42 per cent of wealthy investors said they would consider investing via an automated online investment tool. 

Angelos Gousios, an associate director at Cerulli, said: "The culture and education level of the British investor is compatible with the robo-advice business model.”

He also pointed out that robo-advisers from other countries view the UK as their primary target for expansion beyond their home markets.

This comes as a number of digital advice firms told FTAdviser they would not be stalling their plans for capital expenditure, despite the UK’s impending departure from the European Union.

Investment through digital advice models is partly a generational matter, as younger investors are keen to use online tools to manage their money, Cerulli pointed out.

"Many interesting propositions are appearing across Europe and incumbents have started to enter the robo-advice space,” said Mr Gousios.

“The market is shifting rapidly and providers should be open to new opportunities.”

This comes as research from YouGov, commissioned by CoInvestor found nearly half of Britons with £100,000 of investable assets are benefitting from the government’s changes to pensions legislation in 2015 by having control of their own investments.

Charles Owen, founder of CoInvestor, said: “Clearly we are seeing a trend by private investors to take control of their pensions, their investments and their money."

He said financial advisers should be making it an "absolute priority" to work closely with platforms.

“If financial advisers do not adopt these technologies they risk losing relevancy, especially among a growing, online-savvy younger investor audience that should be their next generation of customers.”

 We can all try to do our own plumbing, painting, DIY, but some things are too important to trust to hoping you’ve done it right Alex Reynolds

Alex Reynolds, independent financial adviser at Advies Private Clients, said he was not surprised at investors' confidence, but pointed out the study does not show how these clients have invested or whether they have used the right investment vehicle.

"There is a lot of information out there that clients can get hold of and many clients will invest passively, so they might feel there is no need to involve an adviser, but there is much more to investing than just the fund choice.

"There is the cost of the investment vehicle both upfront and ongoing, and of course the regular review of the appropriateness of the investment.

Mr Reynolds said: "We can all try to do our own plumbing, painting, DIY, but that does not mean we all choose to, as we all have different skills and some things are too important to trust to hoping you’ve done it right."

He also pointed out that an investor is more likely to take a risk on their own if they can afford to lose money.

"I think investing in a few shares with 'play money' is fine but putting your financial future at risk with investment decisions that you are not sure about seems misguided."