NS&I survey reveals that security prevails as clients’ top priority over inflation risk

  • Clients feel that the security of their savings is more important than the risk of inflation eroding their returns
  • More advisers recommending larger cash holdings – as predicted in January’s survey
  • Advisers reveal views on broader issues affecting investment performance

The latest edition of NS&I’s Financial Advice Barometer shows that for the sixth survey in a row, advisers ranked ‘security’ (protecting assets) as the most important priority for their clients in terms of savings and investment options, up 13 percentage points since the survey was last conducted in January 2017, from 47% to 60%.

Security has now been ranked as the most important priority cited by advisers on behalf of their clients in every Financial Adviser Barometer since the survey began in February 2016.

A clear majority (61%) of advisers also think that security is more important to their clients than inflation risk. Findings suggest that although UK inflation is currently forecast to remain higher than returns on cash deposits, advisers still view the security and flexibility provided by cash as relatively more important than the potential above-inflation returns offered by non-cash investments.

More advisers recommend larger cash holdings

As predicted in the last Financial Advice Barometer in January, there is an increase in the proportion of advisers that recommend that their clients hold a larger percentage of their investment portfolio in cash. 27% of respondents in July said that they recommend that their clients should hold 20% in cash, up from 18% in January. Conversely, 33% of respondents in July said that they recommend that their clients should hold only 10% in cash, down from 40% in January.

The most commonly recommended length of term for fixed-term cash deposits remains one-year, with 60% of advisers choosing this option in the July survey. An increasing percentage of respondents indicate that they expect to make no change (increase or decrease) to their clients’ cash holdings in the next six months (70% in July compared to 60% in January).

Other key findings in this edition of NS&I’s Financial Advice Barometer are:

Advisers have mixed outlook on broader factors impacting clients’ investment performance

In July 2017, the Financial Advice Barometer asked respondents a question about broader issues that may impact on clients’ investment performance. 50% of respondents thought that forecast inflation increases would have a particularly negative impact on their clients’ investment performance; and 49% of respondents thought similarly about the impact of geo-political changes and developments. Conversely, 64% of respondents thought that movements in global stock markets would have a particularly positive impact on their clients’ investment performance; and 56% of respondents thought similarly about the impact of movements in the UK stock market.

Confidence in advice industry remains high

85% of advisers are currently either ‘very confident’ (35%) or ‘fairly confident’ (50%) about the future prospects for the financial advice industry. Over-regulation is the most common reason cited for the few ‘not very confident’ responses.

Andrew Pike, Head of Intermediary Relationships at NS&I, said:

“Advisers are telling us that protecting security is a trade-off that they are clearly willing to make against the risk of inflation eroding the real value of their clients’ investment portfolio. These results confirm that cash remains an important and robust element of any balanced investment portfolio.”

Notes to Editors

  1. NS&I’s Financial Advice Barometer is conducted by sending emails to around 4,000 financial advisers each quarter who are either registered on the Unbiased email mailing list or on the NS&I database. Respondents are entered into a prize draw for a chance to win an iPad mini.
  2. For the July 2017 survey, 889 people opened the email and 80 people responded to the survey, giving a 9% response rate.
  3. NS&I’s Financial Advice Barometer asks a series of financial advice market tracker questions each quarter to build-up a picture over time of how trends within the financial advice market change, including advisers’ sentiment towards cash, how it is used within client portfolios and advisers’ views on the wider cash deposit market. Each quarter, one off topical questions are also asked.
  4. NS&I is one of the largest savings organisations in the UK, offering a range of savings and investments to 25 million customers. All products offer 100% capital security, because NS&I is backed by HM Treasury.
  5. For further information, please contact the NS&I media team.