Investors driven to riskier assets

Cautious investors are being forced to up their risk profile, according to head of investment research at AFH Wealth Management Graham Toone.

Toone believes that low interest rates and fears over inflation are driving people out of the bond and cash markets, even when these assets are most appropriate for them, and into riskier assets.

"There is a real dilemma for low risk investors looking to make a little extra money at the moment. Many are being forced to search for higher yields and growth elsewhere, because they are getting nothing from sticking their money into the bank."
 
His comments come in light of a survey carried out by Dianomi, in which 1,650 investors were asked what asset class they were currently moving away from. Somewhat surprisingly, 42 per cent said that they were moving away from cash, making it the most sold asset class by some 16 per cent. Fixed-rate savings bonds were the second least sought after asset class with 25.9 per cent of votes, followed by property with 23.9 per cent.

In a separate study, Dianomi found that UK investors are being more active in their investments. When asked how savings are invested, 61.15 per cent said they used share portfolios, and 36.7 per cent they used brokers or IFAs.

Though 53 per cent of investors still put at least some of their money in savings accounts, Dianomi co-founder Cabell de Marcellus believes that investors are becoming more heavily reliant on financial experts for advice with their savings: "The current climate is causing a lot of uncertainty for investors, many of whom need to generate retirement income and have been moving away from cash due to low interest rates and concerns about inflation."

"As a result, many UK investors are looking to the financial community for topical advice and support as to where they should be investing their savings to get steady income without taking too much risk. This represents a big opportunity for brokers and financial advisers to educate and advise such a valuable segment of the UK financial market."

Toone agrees that the financial services will continue to benefit from this trend: "What is a dilemma for low risk investors is a gain for financial advisers. It makes sense that both sophisticated investors who make nothing on their cash deposits, and low end investors who want to make a little extra will look to IFAs."
 
Ken Wright, managing director of KDW Financial Services said that he had noticed a change in customer behaviour. He said: "Last year we had a lot of success in people investing their cash into structured products, in order to increase their returns. We have also seen more and more young people looking to start their pensions earlier."

"The majority of our clients have very little knowledge of the financial world, and so as long as people are fed up of the poor rates on their deposits, IFAs will be sure to benefit."