Managing clients’ pension investment anxiety

As such, more than a third (34 per cent) of affluent Britons claimed to be in a weaker financial position than they were at the beginning of the pandemic, when it comes to their retirement finances.

Under such circumstances, these figures certainly suggest that wealthier pension planners are concerned their pension savings will be unable to sustain them throughout their retirement years. As a result, Britons’ growing appetite for investments is understandable.

But is it worth the risk?

Investments offer scope for individuals to make strong gains, and consequently improve their retirement prospects. However, they also come with risk. Indeed, Britons must ensure that they understand the extent of the risk they are undertaking before committing to dramatic changes in their retirement investment strategy.

That said, it appears that some wealthy investors are making reactive decisions to economic uncertainty, and this is extremely troubling. Indeed, My Pension Expert’s survey found that more than two-fifths (44 per cent) of affluent Britons claim to be exploring riskier investments to ensure their retirement savings hold their value against low interest rates.

For example, the majority (56 per cent) of wealthy pension planners claim to favour illiquid investments, such as property or art, over stocks and shares. This is likely because illiquid investments can initially be valued very highly, boosting their appeal in the current context of economic uncertainty.

Wealthier individuals feel their money is more secure when placed in investments.

However, they cannot be easily sold for cash without taking a substantial loss in value. As such, these investments could prove problematic should a retired individual need rapid access to cash.

Accordingly, wealthy Britons would be wise to seek independent financial advice before reactively overhauling their retirement strategy. Surprisingly, however, this does not seem to be the case. Just 32 per cent of respondents to My Pension Expert’s survey have sought such advice regarding their retirement strategy, while even fewer (25 per cent) have consulted a wealth manager.

Failure to seek advice could be detrimental to an individual’s retirement outcome. It could mean that people are choosing the wrong investments to suit their needs, or, worse yet, unknowingly taking on substantial risk, which could irreversibly damage their financial situation.

Clearly, action must be taken to ensure Britons are making informed decisions when it comes to their investments. The question, therefore, is what can advisers do to ensure that this is the case?

The role of advisers

First and foremost, advisers must engage in open and honest conversations with their clients, to ensure they remain calm when faced with the prospect of such economic uncertainty.