As Financial Planning Week draws to a close, the final Institute of Financial Planning (IFP) poll, which was conducted by YouGov for Financial Planning Week in association with Liontrust, questioned over 1,000 people across Britain, has produced some particularly interesting results.
In it, the survey of GB adults asked whether they are likely or unlikely to consider investment in the stockmarket in 2013 in the hope of gaining improved returns over those available from bank or building society deposit accounts. The poll found that people are not in the mood for taking risks, preferring to play it safe instead:
– Only 10% are likely or very likely to consider stockmarket investment next year in the hope of gaining improved returns over those available from bank and building society deposit accounts
– Women appear to have even less confidence than men to invest, with just 7% saying they are likely or very likely to do so compared to 14% of men
– Two thirds (66%) of those aged 55 and over say that they are very unlikely to consider investing, with only 8% being likely or very likely to do so
– 71% of people aged between 18-34 are unlikely or very unlikely to invest, showing that even those who could be saving for their long term financial future are still risk averse.
The worry is that savers are paying a high price for a safe place to keep their savings. Bank and building society deposit accounts might appear to be more risk averse, but there is an elephant in the room – inflation.
With the returns available from deposit accounts at near record lows, when tax and particularly inflation are taken into account, it is quite a challenge for savers to generate a “real” return on their hard earned cash with inflation currently running at 2.7% (November 2012). Despite this, the huge majority of respondents are not considering investing in the stock market, perhaps preferring to stick with the paltry returns available from bank and building society accounts and taking the risk that the value of their money can depreciate instead.
Nick Cann, CEO of IFP comments: “Today’s result shows us that more than ever, the consumer needs professional help with planning their finances. Just leaving money in a bank account is going to see it erode over time with the effects of inflation and that is very dangerous. A plan of action is required to determine what short, medium and long term goals exist so that effective savings and investment strategies can be used which will be mindful of the individual’s attitude to risk and loss, and give the chance of them maintaining the value of their capital over the longer term. Understanding the options at least has to be a positive step forward.”
John Ions, Chief Executive of Liontrust, says: “It is worrying that despite low interest rates from banks and building societies so many people are unlikely to invest in stock markets in the next year. Whilst investing comes with risks, the fact that people are prepared to let the spending power of their money diminish and be eroded by inflation is a cause for concern. Equity investing and the income that can be generated can be a very powerful way of maintaining and improving income over the longer term. It only goes to highlight the need to seek proper advice and gain a better understanding and confidence of other options. Apathy could be the biggest destroyer of future financial goals.”
Rebecca Taylor FIFP, CFPCM IFP President and MD of Dunham Financial Services comments: “While keeping your money on deposit is fine for the short term and particularly for those funds you might need in an emergency, there are considerable risks to doing so for the longer term as inflation will erode their value. Of course, if they are investing in the stockmarket people must be prepared to see the value of their capital fluctuate. However, over the long term, by investing in “real” assets like stocks and shares, people have the chance that the value of their capital will appreciate rather than depreciate.”
The Institute of Financial Planning (IFP) is running a series of daily polls with consumers throughout Financial Planning Week to find out what people are thinking and doing when it comes to their money – and how they are coping with their personal finances during these uncertain times. Tips and tools are available free of charge on www.financialplanningweek.org.uk.
