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Most people have zero risk appetite, FSA finds

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The majority of people have no risk appetite at all when it comes to investments, the latest research by the FSA shows.

The FSA Consumer Awareness Survey 2011 also reveals almost one-in-five people received some form of financial advice in 2011.

According to the poll, 61 per cent of respondents are not willing to take any risk with their investment. Only 4 per cent of the 2,063 people taking part are prepared to take more risk in the hope of securing higher returns.

According to the regulator, consumers have become “slightly” more risk averse since similar research was carried out in 2010.

The number of people not willing to take risk with investments increased by three percentage points over last year, while those prepared to accept more in pursuit of returns has dropped by two percentage points.

“This is not surprising given the uncertainty surrounding financial markets,” the FSA says.

The survey also shows people who own shares directly are the most likely to take risks to gain higher returns, with 8 per cent putting themselves in this category. Some 7 per cent of those with unit trusts, equity Isas or personal equity plans have a higher risk appetite.

In addition, the poll reveals that 17 per cent of respondents have received professional advice about a financial product in the past 12 months, with 47 per cent of these using an independent financial adviser. Some 41 per cent saw an adviser at a bank or building society, while 12 per cent got guidance from other sources such as accountants or solicitors.

“It is important that when people receive financial advice it is appropriate to the individual’s circumstances and they have confidence and trust in the advice received,” the FSA says.

The regulator’s research shows 61 per cent of those who sought advice from an IFA are very confident it was appropriate to their circumstances, while 30 per cent are fairly confident.

Looking at banks and building societies, 33 per cent of consumers are very confident this source was appropriate for them and 55 per cent are fairly confident.


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Readers' comments (31)

  • Consumers, of which I am one, are fickle things. 61% state they don't want any risk, yet I'll warrant the majority of those are holding cash deposits that are steadily losing 2 or 3% in real terms every year. But that doesn't matter, as the balance on the building society passbook is going up so it must be ok...!

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  • But do they realise that the higher the interest rate then potentially the higher the risk of the bank going bust?

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  • Oh yeah, so lets give all our money to banks as it's really safe there isn't it!!!!!!!...........

    mmmmmm..........2008 crash..........

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  • Most people is not the market for most Ifa's.

    Most people take little risk in their life, they are more scared of losing what they have than what they may gain by taking a risk. People who take risks generally achieve more but of course there are times when things do not work out. Be brave, be different in life! Go out and achieve, make things happen.

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  • Thanks for that Mr FSA, spend yet more of our money on a survey of the ignorant. The good news though it using your new intervention powers you now have the justification to ban 61% of risky investments as there is clearly going to be no demand for them, then focus on "authorising" the rest for consumer use. Once done remember to sack 61% of your staff and your work is complete. Hang on won't these 61% of non-risk takers walk into their bank to deposit funds and unwittingly be sold an investment. Damn ! back to the drawing board.

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  • Interesting that adding the very connfident and fairly confident levels together shows only a 3% difference between IFA's and the Banks and Building Societies.

    The IFA's have a stronger very confident position which may be reflective of the much better personal service they provide or it could be the quality of recommendation (hard to tell).

    Given that 'fairly confident' would indicate satisfaction intermediaries appear to need to up their game a bit to get consumers to see the benefit of using their services over the banks and building societies.

    This is the case even if you believe the banks and building societies quality of advice/product sales are poor and the customer doesn't know what he doesn't know.

    The issue is about perception - when the perception of the customer is that they will get better advice using an IFA that's what will make the difference. No amount of moaning and groaning in these columns will do that for you.

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  • More bad statistics as per usual.

    Rubbish mixed statistical measures:-
    'Three out of five people receiving advice from an IFA were very confident that the advice was appropriate to their circumstances — compared with 33% of those going to banks or building societies.'

    Unrepresentative selection of respondents:-
    Can you believe that somewhere between 22% and 23% of those surveyed have no financial products whatsoever - including a simple bank account. Who are these people? Is it possible to randomly select 2,064 people and find that 474 have no bank account?


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  • I would like to know how intricate and searching was the survey questioning.
    Mine is a series of over twenty questions, but having come to a conclusion there involves a long and detailed discussion on the meaning and reality of risk, of definition of loss and comparisons to various risk areas, from stuffing it under the mattress to the 3:30 at Chepstow.
    Invariably the client re-assesses their initial reaction to a more reasoned and logical approach.
    A "survey", unless it contains a comprehensive questionnaire into ATR, is bound to return these results.
    I suspect that those 15% who were more attuned to a realistic risk profile had good IFAs!

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  • Reading this article makes me realise how far my clients are from the norm of these FSA statistics.

    I agree with anon 4.15pm that these average clients are not for IFA's. It also shows how poorly financially informed the 'average' person is.

    That is sad really, as so many people spend their lives missing opportunities due to the paralysis of fear.

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  • The blind leading the blind. The FSA uses the word 'risk' in a very special way which most consumers don't know or care about. Try speaking the same language - that's why we need intermediaries!

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