The current market turmoil and economic forecasts are becoming a significant cause of concern for high net worth (HNW) individuals, research by Charles Stanley has found.
Over half (59%) of those with at least £500,000 ($616,000, €582,000) in investable assets said they are worried by the threat of a recession and high inflation, with under-55s the most concerned (69%).
Although several wealthy investors feel confident (27%) and knowledgeable (30%) in their ability to make investment decisions, just as many are currently more cautious (29%) and risk averse (32%), the UK investment manager discovered.
In terms of attitudes, over the last year, 29% of respondents said they have become more cautious, with the more cited reasons being volatile markets (22%), cost of living (18%) and government issues (10%).
The negative overview has been ignited by the value of the pound, inflation and political change for 40% of HNWs.
But 26% see higher interest rates as a positive since they expect higher returns via saving accounts.
‘State of paralysis’
The present backdrop means that wealth preservation tops the list of priorities for many HNWs, Charles Stanley said.
This is because around 63% of wealthy clients are investing as a way to save for retirement, while 55% to protect their assets.
Some 40% believe building wealth is also important as many plan to pass on money to their children.
Surprisingly, despite a more widespread risk aversion due to economic conditions, the investment manager discovered that just 14% have actually changed the way they invest.
For those, safer and low-risk products seem to be more popular and they have also reported a propensity to hold more in cash deposits.
In terms of age differences, under-55s are more likely to be personally impacted by the current financial situation (36%), compared with 21% overall.
Andrew Meigh, managing director of financial planning at Charles Stanley, said: “It has been a turbulent time for investors, but it appears that HNW investors may be in a state of paralysis, and this is not the time to shy away from investing and planning for the future. Quite the opposite, this should be a time to take stock, re-evaluate objectives, and ensure your investment strategy is aligned to your life goals.
“It’s unsurprising that many people are erring on the side of caution and prioritising protecting their wealth. But with high inflation eroding the value of cash, playing it too safe can also lead to considerable losses in real terms.
“If people want to build a long-term plan that considers inflation married with their overarching objectives, they should speak with a financial planner.”
