Is ’reckless caution’ having a negative impact on your clients’ savings?

Britons appear to be naturally risk-averse, with two in five choosing to avoid investment risk. As a result, large numbers of investors could be missing out on the investment growth they need.

A recent survey by Aegon of more than 2,000 UK adults shows that the majority of consumers are risking financial stagnation, and investment growth well below the rate of inflation, because they worry about taking investment risk.

A recent survey by Aegon of more than 2,000 UK adults shows that the majority of consumers are risking financial stagnation, and investment growth well below the rate of inflation, because they worry about taking investment risk.

Concerns about making the wrong decision when it comes to investing were cited by more than a quarter of those surveyed (28%). In addition, 12% said they were more cautious now than they were a decade ago. Yet 14% would be "more open" to taking more risk if they were told that good investment returns over the long-term meant some risk needed to be accepted.

Despite the UK Bank Base rate averaging just 0.5%* each year over the last 10 years, it seems most savers would still prefer the perceived safety blanket of bank accounts to stock market investments. This lack of confidence and unwillingness to take risk means opportunities for returns above inflation are being missed. To compare, the average fund in the ABI Mixed Investment 40-85% Shares sector returned 7.5%* a year over the same ten-year period.

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Risk should be measured

Regardless of the current turbulent political and investment landscape, failing to take measured risk is not prudent. However, more than half of those surveyed said their appetite for risk was "low" or "zero", preferring lower returns for minimal potential loss.

Just 6% of people said family and friends would describe them as "risk takers". And only 13% said they would opt for either high or adventurous levels of risk in return for high or very high long-term returns.

Knowledge a key barrier

As well as a lack of risk appetite among savers, the survey suggests a poor understanding of investments and highlights a general lack of knowledge about where to turn for professional advice. 80% of those surveyed said they have not sought financial advice, while almost a third suggested they would likely rely on money influencers in the media for ideas and guidance.

Survey results

More than two-thirds said they would be "unlikely" to invest any extra money they have into riskier investments, such as stocks and shares, within the next year. Of those who said they are more risk-averse now than they were 10 years ago, 31% are nervous about the overall state of the global economy, a quarter (24%) have concerns that there will be another financial crash, 19% have made financial losses in the past and are now more cautious with their money, and 12% are uncertain about the best investment strategy to use.

This comes at a time when market volatility has been increasing in a number of markets, including the US. Many investors appear to be nervous about how this might affect their finances if they take on a degree of investment risk.

When thinking about your finances, how would you define your attitude to risk?

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Good financial advice can boost savers' confidence

While fear and uncertainty seem to be key factors holding people back from taking increased risks with their investments, their lack of understanding about the balance between investment risk and potential rewards highlights the value of good financial advice as a way to build savers' confidence, improve their understanding of risk and to inform the right long-term investment decisions.

Without it, the biggest risk investors may be running is the risk that they miss out on the potential long-term rewards that investing in a well-balanced, diversified portfolio can offer.

Conversations about risk, and the use of risk rating models and client suitability questionnaires have arguably never been more important or powerful as advisers help their clients understand their own attitudes to and appetite for risk.

The Aegon Core Portfolios range of funds are now risk rated by Synaptic to help advisers match the funds to the risk profiles of their clients.

Please go to, or speak to your usual Aegon contact to find out more.

* Morningstar Direct, ten-year annualised returns of UK Base Rate and ABI Mixed Investments 40-85% Shares (pen) to 31 December 2018. Past performance is no guide to future performance.

The information in this article is based on research among more than 2,000 UK Adults, conducted by Opinium on Aegon’s behalf in October 2018. The sample has been weighted to be nationally representative.