As the UK continues to face cost-of-living crisis and high interest rates at levels not seen since the 2008 financial crisis, research by Opinium has found half (50%) of IFAs believe their clients will be “worse off” financially in 2023.
In comparison, just 32% said their customers would be better off.
Some 77% of advisers think high inflation and cost-of-living crisis will impact their clients’ finances most, followed by market volatility (49%), uncertainty in the housing market and mortgage rates (39%), cuts to capital gains tax allowance (31%) and cuts to dividend tax allowance (16%).
Alexa Nightingale, head of financial services research at Opinium, said: “As interest rates are predicted to hit levels not seen since the 2008 financial crisis, it’s no surprise that a majority of financial advisers expect their clients to suffer financially this year.
“There are a range of factors impacting finances, from high inflation and the cost-of-living, to tax allowance cuts, and advisers will have to navigate their clients through all of this in 2023.”
Falling confidence
Another study conducted by UK wealth manager Saltus found that the number of high net worths (HNWs) who have confidence in the UK economy is shrinking.
HNWs’ biggest worry is their health (12%), followed by the economy (11%), the wellbeing of their children (6.9%), online security, physical safety, the war in Ukraine, and the UK government.
Being able to afford rent or a mortgage, keeping their job or business afloat, and losing wealth were the issues HNWs were worried the least – at 6.1%, 5.4% and 5%, respectively.
Michael Stimpson, partner at Saltus, said: “The Wealth Index has dropped significantly over the last nine months but, given we have seen the highest inflation levels in 40 years, interest rates climbing approaching levels that predate the global financial crisis, three prime ministers, four different chancellors, and several budgets, that should not come as a great shock.
“Though it is encouraging that, while HNWs’ confidence in the UK economy has dropped, more than two thirds (67%) remain positive. Yes, HNWs do have concerns about the impacts of inflation, interest rates and the ongoing war in Ukraine on their wealth, but the vast majority remain confident, and those confidence levels stand significantly higher among those who take financial advice, highlighting more than ever the importance of having a robust financial plan in place.”
