New research shows risk appetite on the rise as half of Britons fail to meet their financial goals.
In February 2018, we partnered with research firm FTI consulting to survey 1,000 UK investors on their investing habits and outlooks, expanding on research conducted around this time last year for our report, Tax-Efficient Investing in a Digital World. What we uncovered was a mixed portrait of Britain’s retail investors, who are at once disillusioned with their financial prospects, embracing of riskier investments (so long as these point to higher returns) and hungry for better access to opportunities.
Here are some of our key findings.
- A worrying 48% of British investors are failing to achieve their financial goals – 2% more than in 2016. Millennials (53%) and women (50%) in particular say they are ‘off track’
- 68% say they will definitely take, or consider taking on, riskier investments to achieve their financial goals
- Early-stage equities (startup investing) and cryptocurrencies are top asset classes on the higher-risk category, with 10% of UK investors investing in each
- A staggering 67% of investors expect returns from early-stage equities to increase over the next 12 months, with Millennials (71%) and female investors (also 71%) most bullish about this asset class
- On average, investors would move 12% of their investable portfolio to early-stage equities if they had more complete information and better access to investment opportunities, with 65% considering a diversified portfolio of startups helpful in reaching their financial goals
Struggling to keep up
One worrying statistic revealed that half of UK investors (48%) are failing to achieve their financial goals. The fact that this number has increased since 2016 (46%) suggests that the low-yield economic environment is having serious effects on the nation’s ability to reach its financial goals. Millennial investors seem worst affected, with 53% falling short of their goals.
It’s deeply worrying that investors are failing to meet their financial goals, and with Millennials suffering most, the wealth creation of a whole generation is at stake. We can’t keep blaming Brexit. With a diversified portfolio of early-stage equities recognised as one of the avenues helping investors meet their financial goals, I call upon the whole of the industry to tear down the barriers.
Gonçalo de Vasconcelos
CEO & Co-founder, SyndicateRoom
Investors hold mostly mainstream equities (77%), bonds (33%) and residential property (30%), but clearly these most popular asset classes are no longer meeting investors’ expectations.
Is Brexit the cause?
Interestingly, and in spite of popular belief, Brexit appears to have left investors unfazed with 59% claiming the vote it won’t change how they will be investing over the next 12 months. In 2016 this finding was 54%, suggesting investors are getting accustomed to the new ‘normal’ that Brexit uncertainty brings.
Almost a quarter (22%) of investors say they are now more likely to invest. Broken down, that’s nearly half (49%) of Millennials, one-quarter (25%) of Generation X and one in ten Baby Boomers (10%).
Appetite for risk is on the rise
Against the backdrop of dwindling returns, 35% of investors have noticed their appetite for risk increase over the last 12 months. Further, seven in ten (68%) investors say they would take on riskier investments if it gave them a stab at meatier returns. This number increases to nine in ten (88%) among struggling Millennial investors. Cryptocurrencies (10%) and startups (10%) are the most popular higher-risk asset classes.
Great expectations for startup investing
Early-stage equities (startups) remain popular for those seeking high-risk high-return investments, with 10% having invested in the asset class. Three-quarters of investors recognise a diversified portfolio of early-stage equities to be an attractive investment proposition. However, rising barriers to investment are stopping investors accessing this asset class.
56% of investors claim that a lack of information about investing (up 8% since 2016) is stopping them, while 37% say that a lack of awareness of opportunities is a major barrier (up 4% since 2016). On average, investors would be willing to re-allocate 12% of their investable assets into early-stage equities – providing they had ample information on and access to deals.
One-quarter of investors claim that their early-stage investments have outperformed their expectations, with two-thirds (67%) expecting returns to rise in the next 12 months. Millennial investors are more bullish with their outlook, with 71% expecting higher returns versus 56% of Baby Boomers. Women in general are also more optimistic than men in the performance of their startup investments (71% vs 64%).
The prospect of high returns (94%) and long-term returns (93%) are the main drivers to invest in early-stage investing, perhaps unsurprisingly given recent research suggesting that capital growth in startups tends to increase at 30% per year.
Falling awareness of tax-efficient products
Despite great expectations for early-stage equities, levels of awareness of the tax-relief schemes designed to encourage risk-taking investors (VCT and EIS) are falling. Awareness of VCTs has dropped 69% from 77% in 2016, while awareness of EIS has fallen from 59% to 55%.
I challenge Chancellor Philip Hammond to do more to promote VCT and EIS investments. Not only are they instrumental to helping a generation of investors reach their goals, they’re also the lifeblood of Britain’s entrepreneurial businesses, which drive the economy’s job creation and productivity.
Gonçalo de Vasconcelos
CEO & Co-founder, SyndicateRoom