Confidence levels amongst UK investors have risen 20 points (62 – 82) in the last 12 months according to new research amongst UK investors. The Investor Index, now in its second year, is conducted jointly by London-based communications agency AML Group and research agency The Nursery Research and Planning.
The index was launched in April 2020 to assess the immediate impact of Covid 19 on investors and the UK investment marketplace. The first report of its kind to provide an objective overview of the industry based on hard data – the study was welcomed as a barometer of post-Covid investor behaviours.
One year on, and still in the grip of the pandemic, the 2021 study has revealed some significant changes and ‘recalibrations’ amongst investors – and whilst an air of vulnerability persists there is evidence for cautious optimism.
Confidence returns – but not to pre-pandemic levels
Launched last year, the confidence score is based on an aggregated response to a question asking investors to describe their feelings about making investment decisions: ‘in control’, ‘confident’, ‘well-informed’?
Over the past 12 months, confidence levels have risen most amongst older investors (55+) up 30 points (54 – 84), investors that are retired up 27 points (57 – 84), those that use financial advisers up 31 points (65 – 96) and investors with a portfolio of £200k+ – up 38 points (55 – 93).
Confidence levels amongst younger investors (18-34) have shown a marginal increase – rising only 4 points over the past year from 70 to 74. The study has also revealed a disparity in gender confidence levels – with men indicating a 25 point rise over the last 12 months (61- 86) compared to a rise in confidence levels of just 10 points among female investors (65 – 75).
The study can also reveal that 41% of all UK investors have had more money to invest since Covid-19 – with 36% choosing to invest more.
However whilst the results are cause for some degree of optimism – investor confidence levels are still 18 points down from pre-Covid levels.
Commenting on the findings Christian Barnes, Head of Strategy, AML Group says: “ Whilst ‘cautious optimism’ is the trend across our sample, there are some real watch outs for anyone marketing investment products in the short and medium term. The widening gap between the attitudes and behaviours of the young and their older counterparts, the interest in but surprising lack of uptake of more ethically-aligned investments and the rise of ‘tactical gifting’ down the generations should give us all plenty to think about.”
How invested is the UK investor in ESG, Responsible Investing?
Investors feel that ethical/socially responsible financial products are more important now than at the same time last year – up 9 percentage points (23% – 32%) with three in ten of those surveyed stating that they believe that these products will be more important in the future – up six percentage points (24% – 30%).
However despite investors acknowledging the importance of ESG/RI there is a continuing perception, despite contrary evidence, that it carries a performance penalty with investors ‘prioritising financial security over wider ethical considerations’ – up five percentage points (23% – 28%).
“The slow uptake of ESG investments surprised us – we had thought that growing confidence in the markets post Covid, and the increasing evidence of long-term investment potential in sustainable investing would have painted a different picture,” says Sophie Marder, Research Manager at The Nursery Research and Planning. “But perhaps behavioural bias is at play here – we all sense a need to pay over the odds for things that are good for us or others and so our default must be that responsible investing comes with some sort of premium or performance penalty to pay – despite evidence to the contrary.”
Gen Z/Millennials Vs Baby Boomers – the emerging generational divide
Ten per cent of UK investors have started investing since the pandemic began – and of those new investors three-quarters (74%) are under 35s. It’s a changing landscape with the younger investor bringing different attitudes and priorities to the investor table.
Eighty-nine per cent of under 35s have changed their investment strategy over the last year vs. 31% of 55+ investors. Younger investors are also increasingly looking to ESG products – with 27% including responsible investments in their portfolio compared to only 4% of investors aged 55 and older. Younger investors are also more focused on the long game – with 30% looking to longer term investments compared to 8% of investors 55+.
When it comes to investment decisions, younger investors are increasingly turning to family (40%), banks (30%) and friends (27%) for advice.
And when asked about funds, 54% of younger investors stated that they had more money available to invest since Covid-19 compared to 32% of 55+ investors with 51% saying that they had actually invested more since the pandemic compared to just 25% of 55+.
The rise and rise of DIY
Since the start of the pandemic in March 2020, four in ten investors under 35 (39%) have invested more with DIY platforms – compared to just 14% of 55+. And while the younger investor has indicated a ‘happy to do it myself’ attitude regarding financial planning and investments they are less confident when it comes to their feelings about the industry. Just under one-third of under 35s (29%) are confident markets will bounce back compared to more than half (52%) of investors aged 55+.
Perhaps predictably, younger investors are more tapped into trends and news stories connected to investing: 39% of under 35s cited an awareness of the growth in DIY platforms with 44% familiar with the story around Reddit users driving up the share price of GameStop and 31% aware of the rise in silver prices. Investors aged 55+ recorded significantly lower awareness across all trends.
