Appetite for risk has reduced since last year
New research from online investment services provider Willis Owen reveals that UK savers and investors have lost some of their appetite for financial risk. The data shows that amid a mixture of social, economic and political flashpoints, comfort with adopting financial risk has fallen away compared to this time last year. According to Willis Owen, the findings highlight the need for a bigger conversation around the sensible adoption of financial risk – especially with rates on cash savings accounts continuing to disappoint and talk of a possible UK interest rate cut rather than rise.
The research, conducted online by leading national research firm Opinium, asked people to best categorise their attitude to financial risk. Only 15% said they are willing to take a reasonable or substantial risk. Having steadily increased from 14% in 2013 to 20% in 2015, this represents a marked decrease over the last 12 months.
Equally striking is the fact that 45% of people are not prepared to take any risk at all with their finances – also up from 40% last year.
Liz Rees, Head of Research at Willis Owen, commented:
“Risk appetite had been growing among UK savers and investors, but the last 12 months has reversed the trend. Market volatility, oil price fluctuations, the prospect of an EU referendum and concerns about the pace of growth in major economies like the US and China have all created uncertainty. And we know that uncertainty tends to limit risk taking behaviour. This fall in risk appetite might also be evidence of investors getting their fingers burnt in 2015, when there were weaker returns than in previous years.
“However, while the reasons for erring on the side of caution may be evident, the fact is some risk is necessary in order to secure a decent return on investments.”
Willis Owen’s research has also found that attitudes to risk become more polarised among older people. 54% of 65-74 year olds say they don’t want to take any risk while 13% would take at least a reasonable amount of risk. Among 18-24 year olds, however, this narrows to 39% and 11% respectively. The figures also show that London is the capital of risk taking, with 25% of people prepared to take at least a reasonable amount of financial risk.
Jason Chapman, Managing Director at Willis Owen, commented:
“A lot more needs to be done to communicate the potential value of sensible risk taking when it comes to our finances. For too many of us, adopting financial risk remains taboo. Yet the fact is that with interest rates set to remain low for a while, relying on cash savings won’t be enough for many. Some risk may be necessary in order to meet long-term financial goals – a comfortable later life, or being able to support family.
“Even adopting sensible levels of risk, based on a thorough understanding of your circumstances and financial goals, can mean that investments may go down as well as up. But better education on the topic, and providing tools for people to do proper research, will go a long way to helping people feel comfortable with the concept. To dismiss any prospect of financial risk out of hand could actually be the biggest risk of all.”