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Contradictory attitude to risk

Investors do not fully understand the concept of investment risk, according to new research carried out by Cleri cal Medical.

The life office conducted a series of focus groups with target customers to gain some understanding of the barriers consumers have to investing in unit-linked funds and their rationale in the trade-off between risk and reward.

Clerical Medical believes the findings show consumers have contradictory attitudes to risk. One focus group participant said they were not prepared to risk their hardearned money by investing in shares, but owns a quarter share in a race horse.

Twenty-eight per cent of people who have no equity investments do not think they are too risky while 12 per cent of investors who have stockmarket-linked products claim they are too risky.

Clerical Medical says these figures show consumers do not understand the underlying concept of their investments. It thinks these differences in attitudes to risk represent an excellent opportunity for IFAs to educate clients to the rewards of investment products as 35 per cent of the respondents said they were “reassured” by experts recommendations.

Clerical Medical spokes man Tony Muir says: “The findings of our research suggest that there is an opportunity for IFAs to explain the risk profile of different class of investments more clearly to their clients.”

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