UK Investors Don't Budge On Taking More Risk, But Optimism Is Growing - Research

Tom Burroughes

8 January 2013

UK investors’ appetite for taking risks has barely moved over the past two years although there are signs that optimism about the economic outlook is rising, according to a survey of opinion by Ledbury Research.

For the second year running, high net worth individuals in the UK held the share of assets kept in “risky” sectors at 22 per cent, while half their wealth was in cash and property, the research firm, which tracks the global wealth and luxury sectors, said in its Risk Trend Report.

On a more upbeat note, 44 per cent of the HNW population considered themselves optimistic about the investment outlook for the coming 12 months, up from 22 per cent taking that view in the final quarter of 2011.

“These may be the green shoots that we are looking for,” said Jennifer Ross, wealth management analyst at Ledbury Research. “But in order to sufficiently nuture them, wealth managers need to better understand how to protect them from the effects of frost,” she said, continuing the metaphor. “What they must do is to understand the client perspective on risk.”

The report found that HNW individuals tend to have a short-termist approach to risk, measured as investment volatility and loss. It is often pointed out in wealth management circles that risk and volatility, for example, are not necessarily the same things.

“Risk is an undoubtedly complicated area, and keeping abreast of the many contributing factors is a job for the industry, rather than clients,” Ross said, pointing out that to meet clients’ objectives, an advisor may need to explain a requirement to take on more, not less, risk.