InvestmentsDec 14 2022

HNW individuals opt for caution due to recession fears

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HNW individuals opt for caution due to recession fears
Credit: Sora Shimazaki/Pexels
ByJane Matthews

High-net-worth individuals have become more cautious as fears over recession and the impact of high inflation bites.

Research by investment manager Charles Stanley has shown that 69 per cent of high-net-worth individuals under the age of 55 reported being worried about the current economic environment, this compared to 59 per cent of those over the age of 55.

The research, carried out among 200 individuals with over half a million pounds in investable assets in October of this year, found that those surveyed were leaning towards a more cautious approach to investing in the wake of September’s “mini” Budget.

Despite this caution, only 14 per cent of had actively changed the way they invested and only 21 per cent of respondents said they felt personally impacted by the current financial situation.

Those who had made changes and those who said they intend to change the way they invest soon (22 per cent) were planning to invest in safer, lower risk products and hold more in cash deposits.

Charles Stanley noted that this was reflected in the changes in holding over the past year, with 34 per cent of respondents already putting more in safer assets.

Just over a quarter (26 per cent) of surveyed nvestors said they have increased the amount that they hold in cash in the past six to 12 months.

However, the most common reason for these changes were market fluctuations (24 per cent) rather than active involvement. 

Only 16 per cent said that they have actively changed their cash holdings.

Andrew Meigh, managing director of financial planning at Charles Stanley, said it looks as though high-net-worth individuals are in “a state of paralysis”.

“It’s unsurprising that many people are erring on the side of caution and prioritising protecting their wealth. But with high inflation eroding the value of cash, playing it too safe can also lead to considerable losses in real terms,” Meigh said.

He added: “This should be a time to take stock, re-evaluate objectives, and ensure your investment strategy is aligned to your life goals.”

The research also found that the top reasons for investing amongst respondents was to save for retirement income (63 per cent) and to protect wealth (55 per cent). 

Building wealth was also important for 40 per cent of those asked, along with leaving money behind for their children.