Investors opt to go it alone - 04.06.2010
Financial Times
Private investors are taking more direct control of their finances and opting to manage money themselves rather than using financial advisers, according to new research.
Nine out of 10 such investors said that the financial crisis of 2008 had encouraged them to manage more of their portfolios themselves, rather than relying on an investment professional, in a new survey of more than 2,000 people by Money Week, the financial magazine.
Execution-only stock-brokers have been the main beneficiaries of this switch in investing habits. Private client assets held with execution-only brokers were more than 60 per cent higher at the end of March this year than they were in the previous year, according to ComPeer, the industry analyst.
“Investors are taking matters into their own hands more,” said Rebecca O’Keefe at Interactive Investor, the online broker. “We’ve seen an awful lot more investors actually participating in the market in general.”
Many investors decided to manage their finances themselves after losing faith in advisers’ asset allocation models. These delivered heavy losses in 2008, as nearly all asset classes fell at the same time.
“If I had any faith in the financial advice marketplace I would have lost it as a result of that,” said Anthony Chick, an investor who took part in the survey. “I just don’t think enough of the advisory people beat the indices.”
However, financial advisers warned that investors should still consider advice in some complex areas of finance such as tax planning.
Some investors also value professional help with portfolio management. Private client brokers reported an inflow into discretionary services – where advice is given – as well as execution-only services.
Danny Cox, head of financial advice at Hargreaves Lansdown, said: “There are still people saying: ‘I don’t have the time or the knowledge to do it myself.’”