London, 27 September 2016 Research conducted by YouGov on behalf of digital investment manager, Scalable Capital, has revealed that a quarter of investors are more concerned about fluctuations in their investments than they were before the vote to leave the EU. Just six per cent of respondents to the survey are less worried. The survey was conducted across an audience of over 1100 investors in September 2016.
Interestingly it was the younger generation of investors who expressed the greatest concern as 28% of those under 35 said they were either ‘much more’ or ‘a little more’ worried about market movements. The higher level of concern of Millennials to market volatility could be due to the fact that it is a relatively new experience for them, while older investors have ‘been there, done that’ before.
Reflecting their concern with portfolio fluctuations, 1 in 4 (26%) investors also indicated that it is now more important for them to have an accurate understanding of the risk in their portfolio than before the referendum vote. Once again, for under 35’s this trend was more pronounced, increasing to one third (33 per cent). Crucially, almost 1 in 5 investors (17 per cent) also admitted that they currently have a poor understanding of the risk of loss in their portfolios. This rose to 22 per cent among the under 35 age group.
Based on government estimates that 12 million Brits are invested in the markets*, this means that an astonishing 2 million UK investors consider themselves to have a poor understanding of the risks they are taking, and that 3 million people believe understanding those risks are now more important that they were pre-Brexit.
Adam French, UK co-founder of Scalable Capital said: “Major events like Brexit can really sharpen the focus and draw investors’ attention to the fact that their invested capital can fall as well as rise. Brexit was an important reminder for investors to carefully consider how much of their capital they are comfortable to put at risk when investing - and it is quite frankly alarming that the results indicate a group as large as two million feel that they currently have a poor understanding of what that level is.”
“The wealth management industry has been very poor in the past at quantifying risk for UK clients, labeling portfolios and funds with vague terms such as “moderate” risk, and this research shows it needs to do better. There is a particularly strong message coming from investors aged under 35 that things need to improve. As a technology-driven investment manager, Scalable Capital allows clients to select, in percentage terms, how much they are prepared to lose in a bad year, and manages their portfolios dynamically to keep their level of risk stable over time. It is a core element of our new approach to wealth management, with which we intend to change the sector and give both first-time as well as seasoned investors a better investing experience”.
Scalable Capital launched in the UK in the first half of this year and announced a new ISA wrapper this month for its UK clients, allowing them access to tax-free returns from investments.
*In 2015 a BIS Department Consumer Omnibus Survey confirmed that 20% of the population held shares directly or via ISAs/SIPPs, equivalent to about 12 million people at that time (Source: Research on the Intermediated Shareholding Model: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/489357/bis-16-20-intermediated-shareholding-model.pdf)