Financial advice can help savers avoid over-caution
- 34% of advised clients become less cautious about investment risk following a discussion with their adviser, compared to just 16% who become more cautious.
- The difference between returns on a £200,000 ‘cautious’ and ‘adventurous’ initial investment was £93,058 over the last 20 years**.
Attitudes to risk vary dramatically from one person to another, but new research from pension and investment provider Aegon has found that financial advice can play a big role in shaping peoples’ views on the subject.
Research* among 250 advisers, as part of Aegon’s adviser attitudes report 2019, found that 34% of advised clients were less cautious about investment risk following a discussion with their adviser, compared to just 16% who became more cautious.
Commenting on the findings, Nick Dixon, Investment Director at Aegon said: “Risk tolerance varies greatly from one person to another and reflects a large number of factors including our personality, our knowledge of a subject, and even societal factors. What’s clear from our figures is that a significant proportion of advised clients are excessively cautious when it comes to investing and that a conversation with an adviser shifts their views about how much risk they can afford to take. There are many benefits to financial advice, notably the peace of mind that being advised by an expert provides, but it’s clear supporting individuals to take on the right level of risk is one of them. All investors should remember that risk taking is an essential driver of long term returns”
Analysis** of stock market returns by Aegon also found that the difference in returns between a cautious and an adventurous investment portfolio can be stark. For example, over a 20 year period, someone with £200,000 invested in a ‘cautious’ asset mix (as represented by the ABI Mixed Investment 20% - 60% Shares sector average) would have seen their savings grow to £449,068 by end October 2019. In contrast, someone investing in a more ‘adventurous’ asset mix (as represented by the ABI Flexible Investment sector average) would have seen their savings grow to £542,126 over the same period. This represents a difference of £93,058. However, it is important to note that exposure to additional investment risk can have a detrimental impact on investors’ savings.
Nick Dixon continues: “For investors with a long-time horizon, excessive caution can be the greatest investment risk. Financial advisers are well placed to take an objective view of an individual’s circumstances and determine whether they can afford to take on risk in exchange for greater potential upside.”
Past performance is no guide to future performance. The value of investments may go down as well as up and investors may get back less than they invest.
*Research conducted by Opinium based on a survey of 250 financial advisers 25 February - 1 March 2019.
**Source: Financial Express, commissioned by Aegon. Figures in £s on a bid-to-bid basis, net of investment charges with gross income reinvested for 20 years to end October 2019. ABI Mixed Investment 20% - 60% Shares sector average used as a proxy for a ‘cautious investment portfolio, and ABI Flexible Investment sector average used as a proxy for an ‘adventurous’ investment portfolio.
Notes to Editors
- In the UK, Aegon offers retirement, workplace savings and protection solutions to over three million customers. Aegon employs around 2,000 people in the UK and together with a further 800 people employed by Atos, we serve the needs of our customers. More information: aegon.co.uk
- As an international life insurance, pensions and asset management group based in The Hague, Aegon has businesses in over twenty markets in the Americas, Europe and Asia. Aegon companies employ over 26,000 people and have millions of customers across the globe. Further information: aegon.com
Figures correct as of November 2019.
The information in this press release is intended solely for journalists and shouldn’t be relied upon by any other persons to make financial decisions.