Financial advisers in the UK have estimated that around one-in-eight (12%) clients have suffered financial damage because of covid, according to a nationwide study by network The Openwork Partnership.
On the other hand, just 8% of advisers believe that none of their customers “have been adversely impacted”.
The biggest issue advisers reported was that nearly half (48%) saw their clients stop saving and investing during the pandemic, while 32% said customers ran down their savings.
Around one-fifth (19%) worryingly claimed that people took money from their pension funds to make ends meet during the crisis, while 31% said their customers only took the tax-free lump sum, although the withdrawal was made earlier than planned.
This is reflected in data from HM Revenue & Customs, The Openwork Partnership said, as around 1.8 million people took more than £12bn ($17bn, €14bn) in flexible payments from their pensions between 1 January 2020 and 31 March 2021.
But pensions were not the only financial product in advised clients’ sight. Around 27% of advisers said their clients sold investments; 5% sold buy-to-lets; and 4% downsized to smaller homes.
Mike Morrow, chief commercial officer at The Openwork Partnership, said: “It’s been a tough year financially for millions of people despite unprecedented levels of government help and advisers are seeing the impact on the ground.
“Of course, many people have benefited financially during the crisis with more money going into savings, but one-in-eight clients on average suffering losses is bad news and particularly so when people are taking money out of long-term investments to keep going in the short-term.
“The value of financial advice and financial advisers will be very important as the UK starts to recover from the financial impact of the crisis, demonstrating how vital advice is and the role it plays in what are very personal situations.”
But the impact of the pandemic was not all negative.
A study by Prudential revealed that half (51%) of UK adults are now more inclined to invest ethically and sustainably than before.
This is true for 60% of millennials, 44% of gen X, and 35% of baby boomers. Additionally, 45% of investors said that they now only want to invest in sustainable companies and funds.
Despite the boost in ESG desire, more than a third (36%) of UK adults are still not aware of where their financial products, including workplace and private pensions, are invested in.
The pandemic has also prompted more people to seek financial advice, as 53% of respondents said they have already contacted an adviser or was planning to.
Catriona McInally, investment expert at Prudential UK, said: “With £5.5trn in personal wealth due to be passed to the next generation by 2047, the role intergenerational planning advice played, prior to the pandemic, was already a significant one.
“Yet the crisis has reframed financial priorities. Not just for those later in life with inheritance tax liabilities, but for all generations.
“Once perhaps viewed as a fad, sustainable investing is becoming normalised, making it a fundamental building block within intergenerational financial planning. It also enables clients to leave their children more than just a financial legacy in terms of planet, environment, and society.
“With two in five advised clients surveyed confirming they expect to increase the amount they invest in ESG investments over the next five years, incorporating responsible investments into recommendations will become increasingly critical and provides advisers with an exciting opportunity.”