Alex Hoctor-Duncan at BlackRock sees challenging trends in latest Global Investor Pulse survey
Alex Hoctor-Duncan, head of BlackRock’s EMEA Retail business, has looked into the ways Europe’s investors are failing to plan their futures in light of responses to the manager’s latest Global Investor Pulse survey.
The global economic crisis has been a financial and psychological challenge for savers. For six years they have consumed a daily diet of gloomy headlines, leaving many struggling to save and make sense of the continued market uncertainty. Many are asking a simple question: what should I do with my money?
Therefore, it comes as little surprise that BlackRock’s Global Investor Pulse survey, which asked 17,600 people around the world how they’re planning for their financial future, found that over half of the 9,600 European adults spoken to feel negative about their financial futures. In the UK, people’s outlook is slightly more positive but, even so, nearly half have a negative outlook about their financial futures.
There is some hope as our research identifies that Europeans who take financial planning seriously are much more likely to feel more confident about the savings and investment decisions they are making (61%) and more in control of their financial futures (56%), compared to about four in ten of those who are not engaged with their finances.
Yet the bald truth is that most Europeans have slipped into a defensive mode when it comes to their finances. Only 17% of Europeans describe themselves as actively investing, while in the UK the figure is 19%. This leaves a rump of nearly two-thirds of Europeans not investing.
Given that preserving wealth was the top priority for European adults, it is understandable that it has felt appropriate to adopt a conservative approach to investing. 53% of Europeans said they were not willing to take any risks with their money, compared to 57% in the UK. Similarly, a quarter of Europeans would not be willing to take more risk with their investment approach in order to achieve higher returns.
However, longer-term goals such as funding a comfortable retirement, being able to draw an income from savings and investments, and growing wealth ranked close behind.
In the UK, the order of priorities was more focused on the long-term, with funding a comfortable retirement and growing wealth the top two, followed by preserving wealth. Yet, despite the priority of these longer-term goals, 63% of adults in the UK describe themselves as not actively investing, which suggests that they may need more of a financial plan to meet their goals.
We also looked at where investors sourced financial information; in other words – what is influencing their investment plans and ideas? It revealed that there is a clear reluctance for people to use professional financial advice (17%), turning instead to sources closer to home. Indeed people are most likely to use their own thoughts and ideas (41%) than any other method. A quarter rely on input from friends and family, over a fifth on the internet and one in five on personal finance newspapers and magazines.
Worryingly, Europeans spend more time planning a holiday (38%) than reviewing their savings and investments (28%).
With this attitude to finance in mind, it is perhaps unsurprising that there is widespread concern amongst Europeans about being able to meet key retirement needs. Most people accept that the onus is increasingly on the individual to provide for their financial future. Across Europe, companies and governments are struggling to make the same retirement provisions that they have in the past due to ageing populations, increased longevity and regulatory changes. Yet with life expectancy rising and the need for people to fund longer retirements, investors need to ensure their assets work harder over a longer time period – something which could be greatly enhanced by seeking the guidance of a professional financial adviser.
The younger generations could take great benefit from the wisdom of elders (current retirees) whose main advice is that people start saving as early as possible. This was the main advice for 62% of Europeans and 73% of those in the UK.
After this, the recommendations were to think long term and save as much as possible. It is likely that those older generations would answer the question “what should I do with my money?” by saying: “First, start with a plan, then evolve the plan as your life changes. But always have a plan.”