The pandemic and long lockdowns left a trail of losses in most areas of the economy, but investment advisers stand to gain from a ‘confidence gap’.
A recent customer behaviour survey by Standard Chartered unveiled interesting findings that could provide lots of leads for financial advisers in the UAE.
The survey was conducted among 15,649 emerging affluent, affluent and high-net-worth individuals across 12 markets: including India, China, Singapore, the UAE and the UK, between June 30 and July 26.
In the UAE, it found that 88% have reset their life goals following the pandemic.
But, for 43% of the respondents, their financial confidence has been diminished, preventing them from taking the actions needed to achieve their goals.
The emerging affluent have disproportionately suffered a loss of confidence, with almost half (46%) reporting a decrease compared with 30% of high net worth (HNW) individuals. New investors should seek financial advice from professionals. There are plenty of great people to learn from. For example, Motley Fool’s investment advice has helped millions of beginner investors in the stock market.
For the affluent across the wealth spectrum in the UAE, the three most common factors impacting their confidence were:
- volatility in financial markets (35%),
- fear of poor returns on investments (30%)
- the complexity of developing an investment strategy (26%)
That means those lower down the wealth spectrum, still establishing their finances, stand to lose out more if they do not have support to rebuild their confidence.
“This support and confidence can be given by professional advisers only, as experience shows that those who followed peer advice or took investment decisions on own market intelligence ended up in capital loss,” said Rajagopalan Ramesh, chief executive, Veracity Consulting FZE, Abu Dhabi.
“The pandemic impacted both the investment perception and risk profiles of UAE affluent. It prompted them to reset their financial priorities and encouraged them to seek new financial products, which increased their rate of savings for the future while being more engaged in tracking their financial performance,” said Owen Young, Standard Chartered’s regional head of wealth management, Europe, Middle East and Africa.
The pandemic prompted the affluent in the UAE to become more future-focused when resetting their priorities. Half (47%) have set the goal to improve their health, followed by 39% wanting to set aside more for their children’s future (education or financial support).
To meet these goals, the affluent need new strategies to grow their wealth, which often involves more proactive investment rather than just saving cash.
However, their current ‘confidence gap’ has made many increasingly risk averse, potentially stopping them from putting their money to work through investing or making use of digital tools that simplify wealth management.
“It was here that investment advisers had a field day. People who used to invest on peer advice or driven by own market knowledge, often half baked, suddenly realised the benefits of professional advice started patronising investment advisers,” said Ramesh.
Risk-averse, but clueless
The UAE affluent have become more risk averse and are actively adapting their finances to the global economic situation with eyes on global market volatility and interest rate levels. A sizable percentage of the affluent sample in the UAE expect future returns to drop and are aligning their portfolios to this new normal.
“We, at Standard Chartered, acknowledge this trend and are working closely with our clients to grow, manage and most importantly protect their money,” Owen said.
The survey findings say that a late start to retirement planning, combined with the pandemic-induced confidence gap, leaves a significant proportion of affluent consumers at risk of a shortfall for their retirement.
The survey found that 31% of people do not currently save/invest for retirement.
Of those that do, investment income (50%) and cash savings / deposits (37%) are the most common expected sources of income in retirement.
At the same time, 53% plan to retire before the age of 65; and, in the last 18 months, 19% have set the new financial goal of retiring earlier. This shows a disconnect between current actions and future expectations, if a confidence gap is holding them back from investing.
Ramesh, who is a former banker, says this is where the role of financial advisers becomes crucial to allay fears of loss and instill confidence among skeptic investors.