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28 April: CFA Reports Leap In Trust For Financial Services
A new Chartered Financial Analyst (CFA) Institute study shows that 51% of UK retail investors now trust the financial services sector, compared with just 33% in 2020.
The CFA Institute is a global body of investment professionals, which administers CFA accreditation and publishes regular investment research, including its biennial report on investor trust.
According to the latest report, the majority of UK retail investors (59%) now believe it’s ‘very likely’ they will attain their most important financial goal. For 58%, this is saving for retirement, while a further 12% are prioritising saving for a large purchase such as a home or car.
The CFA surveyed over 3,500 retail investors across 15 global markets, and found that trust levels have risen in almost every location. On average, 60% of global retail investors say they trust their financial services sector.
The CFA study views last year’s strong market performance as a key driver for investor trust. In 2021, both the S&P 500 and NASDAQ achieved average returns of over 20%, while the FTSE 100 returned 14.3% — its best performance since 2016 (although global markets have since suffered falls in line with the general economic downturn).
Another factor is the uptake of technologies such as artificial intelligence-led investment strategies and trading apps, which can improve market accessibility and transparency. Half of retail investors say increased use of technology has instilled greater trust in their financial advisor.
The study also revealed investor desire for personalised portfolios that align with their values. Two-thirds say they want personalised products, and are willing to pay extra fees to get them.
Investment strategies that prioritise ESG (Environmental, Social, and Governance) credentials are a key target area for this personalisation, with 77% of retail investors saying they are either interested in ESG investment strategies or already use them.
Rebecca Fender, head of strategy and governance for research, advocacy, and standards at the CFA Institute says: “The highs we’re now seeing in investor trust are certainly cause for optimism, but the challenge is sustaining trust even during periods of volatility.
“Technology, the alignment of values, and personal connections are all coming through as key determinants in a resilient trust dynamic.”
20 April: AJ Bell Aims Trading App At Market-Shy Investors
Investing platform AJ Bell has launched what it claims is a “no-nonsense” mobile app aimed at investors with considerable sums to invest, but who are daunted by the prospect of stock market trading.
AJ Bell is hoping that its Dodl app will appeal to savers disappointed with low returns on their cash and who are looking for an easy way both to access the stock market and manage their investments.
City watchdog, the Financial Conduct Authority, recently identified 8.6 million adults in the UK who hold more than £10,000 of potentially investable cash.
Research by AJ Bell prior to the launch found that about a third of people who don’t currently invest (37%) are put off from doing so because of not knowing where to start. About half (48%) said being able to choose from a narrow list of investments would encourage them to start investing.
Dodl will therefore limit investors to a choice of just 80 funds and shares that can be bought and sold via their smartphone. In contrast, rival trading apps offer stock market investments running into the thousands.
The app will offer several products that people need to save tax efficiently, including an Individual Savings Account (ISA), Lifetime ISA and pension. Dodl will also feature “friendly monster” characters that aim to break down traditional stock market barriers and make it easier for customers unfamiliar with the investing process.
AJ Bell says a Dodl account can be opened via the app in “just a few minutes”. Customers are able to pay money into accounts via Apple and Google Pay, as well as by debit card and direct debit.
Dodl has a single, all-in annual charge of 0.15% of the portfolio value for each investment account that’s opened, such as ISA or pension. A £1 per month minimum charge also applies. The annual cost of holding a £20,000 ISA via Dodl would be £30.
Buying or selling investments is commission-free, and no tax wrapper charges apply. AJ Bell says customers investing in funds will also be required to pay the underlying fund’s annual charge as they would if they were investing on the company’s main platform.
Andy Bell, chief executive of AJ Bell, said: “Investing needn’t be scary. In developing Dodl, we’ve focused on removing jargon, making it quick and easy to open an account and narrowing the range of investments customers have to choose from.”
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14 April: Market Turbulence Takes Toll On Wealthy Investors
Millionaire UK investors experienced greater losses compared with their less well-off counterparts since the start of 2022, with market volatility doing more damage to riskier portfolios favoured by those with greater amounts to invest.
Interactive Investor’s index of private investor performance shows that those of its customers with £1 million portfolios experienced losses of 4.2% in the first quarter of this year.
By comparison, average account holders were down 3.6% over the same timeframe, while professional fund managers had lost 3.7% of their money.
Figures stretching back over longer periods reveal an improvement in overall performance figures. Typical customers experienced losses of 1% over six months but were up by 5.4% over the past year.
Professional managers fared marginally worse, being down 1% over six months and up 5.3% over the last 12 months.
Stock markets worldwide have endured a troubled time in the first quarter of this year. According to investment house Schroders: “Russia’s invasion of Ukraine in late February caused a global shock. The grave human implications fed through into markets, with equities declining.”
Richard Wilson, head of Interactive Investor, said: “The horror unfolding in Ukraine has framed what was already a torrid time for markets. So, it’s no surprise to see the first quarter of the year chart the first negative average returns since we first started publishing this index.
“Markets don’t go up in a straight line, and this index is a sobering reminder of that. It’s also a reminder of the importance of taking a long-term view, and not putting all your eggs in any one regional basket.”
[] In recent months, those with money in savings have become more wary about investing in markets.
Hargreaves Lansdown (HL), the investment platform, said that roughly one-third of investors who put money into a stocks and shares ISA this year have kept their money in cash rather than investing it.
In the previous two years, HL said that about a quarter of investors have favoured cash over markets-based investments.
31 March: Research Reveals Investor Inflation Concerns
Most investors with individual savings accounts (ISAs) are concerned about the short-term impact of inflation on their portfolios, according to research from online investing platform Freetrade.
ISAs comprise a suite of government-backed savings plans which, depending on the product chosen, allow interest or investment growth to accumulate tax-free
In a poll of 1,000 ISA holders, commissioned by the company in association with the Investing Reviews website, two-thirds (67%) said they were worried about the effect of inflation on their investment gains over the next three years.
Freetrade found the typical investor expects to make returns of 5.8% per annum over that period. But with the consumer prices measure of UK inflation recently soaring to a 30-year high of 6.2%, the majority of investors expect to find it harder to make real gains in the foreseeable future.
Despite rising interest rates and increased stock market volatility because of the conflict in Ukraine, Freetrade said a significant proportion of investors – one-in-five (19%) – still expect to make double-digit gains in the immediate years ahead.
In another finding, less than a third (31%) of investors believe that a strategy of holding single company stocks promised the best future returns. In contrast, nearly half (49%) thought low-cost funds were likely to offer the strongest performance.
The poll also revealed more optimism about the potential of UK equities, following record outflows of £5.3 billion from the sector during 2021. One-in-five investors intend to increase their exposure to domestic assets, while 4% are inclined to sell off their UK holdings.
Freetrade’s Dan Lane said: “Maybe the UK market’s relatively cheap valuation is proving too hard to resist, or maybe the allure of US tech is waning slightly. Whatever the reason, the UK seems to be back on the menu in 2022.”
* For savers and investors who haven’t already done so, time is running out to use this tax year’s ISA allowance. All UK adults have an ISA…
Read More: Investment And Market Updates: Uptick In Public Trust For Financial Services