Only 6% of the UK adult population have received financial advice in the last 12 months. This leaves an estimated 47 million people not receiving advice.
The suspension of trading in the Woodford Equity Income fund has been unsettling for many private investors. But we should not allow an individual incident of this kind to cast a shadow over the long-term benefits investing can offer, compared to the perceived safety of cash.
Collectively the industry and regulator need to work together to maintain consumer confidence, understand what, if anything, has gone wrong, and then what changes, if any, need to be made. The reality is that open-ended investment funds are already tightly regulated in the UK to protect consumers. While suspensions in trading are extremely frustrating for consumers, as we saw with property funds in 2016, they do offer protection to smaller investors as they stop sophisticated investors getting their money first.
However, we need to keep this in perspective. Investing does carry with it an element of risk, but then again so does maintaining cash. Since June 2008 the real value of cash has fallen by over a third, according to the retail price index.
To save for the future, consumers need to take some risk. Prudent long-term investors recognise this and it is an important message to advance. Similarly, it is typically good practice for investors to spread their investments across funds and not 'put all their eggs in one basket.'
But these are not set rules that investors instinctively follow, particularly those who do not have access to a professional adviser. We should take note of the FCA’s research, which suggested that only 6% of the UK adult population have received financial advice in the last 12 months. This leaves an estimated 47 million people not receiving advice. Some will be confident self-investors who are comfortable constructing their own investment strategies, but the vast majority will not.
MWS is a firm believer that the future of financial advice needs a regular face to face interaction to ensure plans continue to remain relevant as markets and clients needs change. For any financial advice or reviews of your portfolios get in touch with us today.