Why are advisers more bullish than their clients?

The latest Embark Investor Confidence Barometer* reveals an interesting divergence between adviser and investor confidence.

After a torrid time since our last survey in February, investor confidence has taken a significant knock. Advised clients are much less bullish, with those expecting a rise in equities in the next 12 months falling to 40% from 61%. Unadvised investors are more bearish - only 30% expecting a rise, down from 48%. These declines are understandable given how equity and bond markets have fallen this year against a relentlessly gloomy news-flow dominated by rising interest rates, the war in Ukraine, and rising energy and food prices.

Why have advisers turned bullish as investors have become more bearish?

What may be surprising is that adviser confidence has moved in the opposite direction to investors, as stock markets have corrected. The percentage of advisers predicting a rise over the next 12 months increased to 62% from 57%. Similarly, adviser confidence for a rise in markets over five years moved up to 63% (from 55%) and over ten years to 67% (from 47%). Why might this be?

Well, advisers are experienced enough to know that corrections have historically been a good time to enter the market. Advisers are also less likely to be influenced by the news, knowing that markets typically bottom when it’s most gloomy. Interestingly, this contrarian philosophy appears to be rubbing off on clients. The fact that 52% of advised clients believe that ‘market corrections are a good time to buy’ compared to only 42% of unadvised investors underlines the strength of the adviser-client relationship in promoting what history has shown to be sensible long-term investing behaviours.

Retirement confidence dips, but the benefits of advice still shine through  

It is not surprising to see retirement confidence levels dip since our last Barometer. The percentage of investors who are confident they will be able to achieve their retirement plans has fallen from 78% to 72% for advised clients and from 63% to 57% for unadvised. We have also seen a large drop in how confident investors are that there will be no unforeseen need to withdraw significant money. These declines are likely to be a function of the higher levels of uncertainty created by more volatile markets and rises in the cost of living.

There is still a notable difference in retirement readiness between investors who seek advice and those who go it alone. Advised consumers are 15 percentage points more confident than unadvised investors about achieving their retirement plans, 17 percentage points clearer on how much money they need to retire and 18 percentage points more confident that there will be no unforeseen need to withdraw significant money. These results point strongly to the benefits of financial advice.

Ranila Ravi-Burslem, Intermediary Distribution Director at Embark Group, said “It has been a challenging year for investors, but this is the time when the benefits of having an adviser come to the fore. Advised clients have greater clarity on how much money they need to retire than unadvised investors, and they have greater confidence that they will achieve their retirement plans. Advised clients are also more likely to take advantage of the more reasonable stock valuations that market corrections create. This speaks to the work that advisers do to prepare their clients for market drawdowns and ensure they have the willpower to stay the course with their investments.”

Find out more from the Embark Investor Confidence Barometer and download the full report: embargroup.co.uk/icb


* We surveyed 252 financial advisers with firm assets under £500m, 250 advised investors and 506 non-advised investors with at least £100,000 in assets who were aged 35-70. The survey was carried out by Censuswide in September 2022 and our previous survey (EICB3) was carried out in February 2022.

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