Affluent to ultra-high-net worth (UHNW) investors in the UK are the most conservative in terms of investment risk among international peers, according to new research among banking and wealth management clients in ten leading economies, including China, India, Switzerland and Japan, commissioned by Avaloq, a global leader in digital banking solutions.
More than half (54%) of UK respondents rated themselves as conservative in terms of their approach to risk, with 20% describing themselves as ‘very conservative’. Only 10% said they take an aggressive approach to risk – the lowest of any nation surveyed. In contrast, almost half (45%) of respondents in China said they were aggressive in terms of risk, with just 19% saying they were conservative.
Respondents in the UK also stand out for the relatively high use of financial advisers and planners, with around a third (29%) saying they use them, the highest of any of the nations surveyed. While a high proportion of individuals (72%) said they also manage their own investments, this is still the second lowest globally after France (65%). In addition, one in seven (14%) of UK respondents reported they use a robo-advisory to manage their investments.
According to Avaloq’s research, part of an extensive international study looking into investment behaviours and market sentiment of wealthy investors, the primary reason (cited by 66%) given for saving and investing by UK respondents is for their retirement – perhaps reinforcing the low-risk, long-term mindset of UK investors. Retirement was ranked far higher than other reasons such as future healthcare costs (35%) and entrepreneurial activities (17%).
In terms of asset classes and underlying investments, affluent investors in the UK show little appetite for exposure to complex structured instruments. According to Avaloq’s study, they have one of the highest allocations to investment funds (cited by 56%) though use of ETFs is the lowest of any nation at just 11%. In addition, more than half (53%) say they hold investments in cash.
Despite a high number of UK respondents stating they have a low-risk approach to investing, almost a quarter (23%) said they have exposure to cryptocurrencies in their portfolios – showing some understanding of emergent investment opportunities and, possibly, a need for advisory support. The UK figure was in the middle in terms of respondents from other countries, with wealthy investors in India the most invested in cryptocurrencies (49%).
John Wilson, Managing Director of the UK and Ireland at Avaloq, said: “We believe that our study underscores the opportunities for wealth managers and other investment professionals in the UK, particularly when it comes to appropriate risk profiling, portfolio diversification and allocation to products such as ETFs. The clear interest in cryptocurrencies should also be seen, we firmly believe, as a strong opportunity for financial institutions to expand their service offerings.
“The capability to deliver a hyper-personalised, bespoke service proposition to wealthy clients already exists through the use of cloud computing and powerful data analytics. This focus on providers to deliver a truly unique investment management experience to clients will likely be a key competitive differentiator in the UK and globally as institutions look to build market share. As a global leader in innovative wealth management technology, Avaloq is well positioned to help financial institutions capitalise on the fast-digitalising UK wealth management market.”
To view the full report, please visit this link here.