Adviser clients are currently more concerned about potential investment losses rather than how much money they can make, Skandia research reveals.
A new Skandia survey shows 76% of advisers feel client return expectations are taking a back seat to worries on losing money.
Skandia says the study reinforces the need for a risked-based asset allocation approach, to allow clients to feel comfortable in investment decisions.
The study reveals two thirds of advisers expect to see online risk profiling tool usage to increase over the next year, with just 7% expecting a decline.
It also shows 78% of advisers consider matching asset allocation to risk appetite to be the most important portfolio construction factor, as opposed to fund selection.
Skandia investment marketing head Graham Bentley says using risk-based funds can also offer a good solution to asset allocation concerns.
“This research supports the theory of asymmetric utility - the belief that most clients are more concerned with how much they could potentially lose than how much they could make from an investment,” he says.
“With advisers’ intent on ensuring the recommendations they make match the risk appetite of their client, they are going to need to ensure the client’s risk profile remains in line with their portfolio throughout the duration of the investment.”IFAonline
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