Inaction due to Brexit uncertainty could have cost investors £9,000 in returns, research has claimed.
Industry performance analysis, conducted by challenger wealth manager Netwealth, has suggested investor uncertainty would have cost them between £4,400 and £9,100 in 2019 subject to the investment style undertaken, based on a £50,000 portfolio.
This came as a survey of 1,080 UK adults by Netwealth revealed more than two-fifths of people had been deterred from putting new money into investments because of Brexit uncertainty.
Meanwhile 38 per cent of investors were deterred by wider UK political uncertainty and 33 per cent by the prospect, in the run-up to December’s general election, of a Labour government and its economic implications.
Despite delaying their investment plans in 2019, 30 per cent believed that any investment made would have increased in value.
Returns based on £50k investment
Cost of caution
Cautious Allocation (up to 40% Equities))
Moderate Allocation (up to 60% Equities)
Adventurous Allocation (Up to 75% Equities)
Iain Barnes, head of portfolio management for Netwealth, said: “It’s clear that prospective UK investors have been put off by the ongoing uncertainty around Brexit and the volatility of the political landscape throughout 2019.
“This cautious approach has led many to miss out on potentially healthy investment returns. Investors should recognise that there will always be risks to investing. Ensuring you have a balanced and well-diversified portfolio will minimise exposure to individual events and enable you to benefit from the returns that long term investment can offer.”
But despite more certainty over the political landscape, almost half of respondents with assets totalling £50,000 and above (47 per cent) reported they were still unlikely to invest in the next 12 months, with Brexit remaining a key concern for 36 per cent of these respondents alongside concerns about a wider recession within the UK (32 per cent).
In addition, one in 10 said they had been put off from the fallout from the Neil Woodford failure, highlighting the impact of the reputational challenges faced by the sector in 2019.
The uncertainty of UK politics beyond Brexit
Concerns about a recession in the UK economy
Lack of transparency within the investment industry
Woodford/patient capital scandal
Charlotte Ransom, chief executive of Netwealth, said: “These findings clearly highlight that the industry must do more to engage potential investors and emphasise the value of time in the market, rather than timing the market.
“For many, their caution is misplaced versus the horizon of their financial goals and may cause them to miss out on important returns that could be highly beneficial to their long-term finances.
“The industry should also accept the role it has played in exacerbating mistrust among investors. In 2020, we must see greater commitment to end the exorbitant, opaque and complex fees that for too long have eroded investor returns.
“Only by getting this right can we start to change investor attitudes, enabling them to reap the benefits that intelligent and efficient investment can bring to their long-term financial welfare.”
A similar piece of research, carried out by YouGov among 1,664 UK adults on behalf of insurer Royal London, found pessimism among investors had started to diminish after the December 12 general election brought more political certainty.