Savers eye cash over long-term equity investing amid cost-of-living crisis
Savers look to cash over long-term equity investments as interest rates rise… but their financial advisers are more bullish on bonds
- The impact of the cost of living crisis has prompted investors to look into holding cash
- Capital loss tops investors’ list of concerns, followed by inflation
- Savings rates have recently risen, with one-year fixes paying out up to 5.3%
Savers remain cautious when it comes to investing and are increasingly asking advisors to hold cash, a new survey shows.
Schroders UK Financial Adviser’s Pulse survey found that 90 percent of advisers had spoken to clients about the benefits of cash versus long-term equity investments.
The main driver was the cost of living crisis, with 89 percent of advisors reporting that some clients had changed their plans as a result, up from 53 percent in November 2022.
Rising savings rates have also contributed, with many fixed one-year accounts now paying interest in excess of 5 percent.
Investors are increasingly asking financial advisors about the benefits of holding cash
Nearly two-thirds of advisor clients say higher household expenses have led them to rethink where they put their money, while 44 percent cited helping a larger family as the reason.
Savers are increasingly cautious about investing in the stock market, despite the progress made in recent months. 44 percent of advisors report that client sentiment remains bearish. Reassuringly, it represents a 68 percent drop since November 2022.
It’s no surprise that investors are increasingly looking to keep their savings in cash, as the best one-year fixed rates in our independent best-buy savings rate tables pay out up to 5.30 percent.
Advisors themselves are more optimistic about equities: only 31 percent expect returns to be lower than historical averages over the next five years. About 17 percent expect a higher return.
Interest in private wealth is also growing as investors gain more access, with 21 percent of advisors considering using private equity with their clients.
The outlook for bonds is more positive, with 26 percent expecting returns to be higher than historical averages compared to 19 percent expecting lower returns.
About 55% of financial advisor clients said loss of capital was their top concern
It marks a significant drop from 62 percent who expected meager returns around the same time last year.
“However, it is encouraging to see that advisors’ expectations for interest rates and inflation are that both will fall, laying the groundwork for a turn to a more optimistic outlook.”
Despite concerns about the impact of the cost-of-living crisis, interest rates are the least of the concerns of advisor clients, although this may be biased as many have already paid off their mortgages.
Instead, capital loss tops the list of concerns, followed by the impact of inflation.