9th April 2015
More than two thirds of financial advisers have admitted that their clients are planning on retiring later, compared to just five years ago as a result of a pension saving shortfall according to research by BlackRock.
The asset manager’s Investor Pulse Adviser Survey revealed that 70% of advisers think their customers are concerned about outliving their savings in retirement and as such, almost three quarters of advisers, at 71% believe they are planning on working longer and retiring later. A further 66% of said their clients are concerned about the potential cost of funding long-term care.
But despite fears they will outlive their retirement savings, four in five advisers disclosed they believe their clients hold too much cash or are too risk averse. Furthermore, 39% believe not taking inflation into account is a common investment mistake people make.
Whilst advised customers save and invest double the amount, at 41%, of their take home pay each month compared to non-advised clients, at 23%, they are still over-allocating to cash within their investment portfolios as they said ideally they would hold less than a third of their assets in cash.
Equities still in favour
The findings also revealed that advisers’ attempts to diversify client portfolios away from cash is reflected in their 2015 asset allocation approach, as 40% plan to increase client’s exposure to equities. Advisers are also encouraging increased positions in multi-asset while reducing positions in cash and fixed income.
Currently, advised client portfolios typically have 45% in cash, 23% in equities 12% in bonds, 11% in property with 9% in alternatives and other investments. However non-advised investors have a staggering 74% allocated to cash and only 10% dedicated to equity investments, 6% to bonds and 4% to property.
The analysis also found that 50% of advised clients think the state of the UK economy is a risk to their financial future, while only 39% of advisers consider this a concern. Two in five – or 46% – of advised clients feel the high cost of living poses a threat, compared to a third of advisers. In contrast, long-term goals feature much further down the list of threats, under a third of advised clients are concerned about healthcare costs and just 25% think about the impact of living longer.
Jeremy Roberts, head of UK retail sales, at BlackRock, said: “Advisers are increasingly encouraging their clients to invest for lifetime goals, particularly as they believe two thirds of their clients are concerned about outliving their savings in retirement.
“Saving for retirement and working longer is clearly preying on the minds of British people, which is unsurprising given the new choices and control they now have over their pension at retirement. With increased choice comes greater financial responsibility and people of all ages, not just those approaching retirement, must think carefully about their income needs, their over-reliance on cash, and importantly, how their savings are invested for the longer-term.”