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Show of resilience

Given the tumultuous events in the markets at the end of 2008, you would have expected investor confidence to have hit rock bottom. But it seems that retail investors are more resilient than that.

The IMA conducted its second survey of investors last November, six months after its first survey in May. Unsurprisingly, investor confidence has gone down since May and the crunch has increased pessimism and made investors more cautious.

But confidence did not fall as much as might have been expected and there is a growing group of investors who can see good investment opportunities arising from the crunch, with 44 per cent saying that if an opportunity to make a good return was spotted, the risk was worth taking.

Confidence fell by seven points to 71 (100 being neutral) between May and November, which is relatively modest. We also measured investor intentions and again there was a fall, this time of nine points, from 98 to 89. This shows that investors are slightly more likely to withdraw from investments than to make new investments.

The survey also shows what investors think about IFAs and makes an interesting point about client retention. Nearly two-thirds have used an IFA at some time but of those who have not had contact with an IFA for two years, 68 per cent are unlikely to seek advice from that IFA again compared with 36 per cent who have used an IFA in the last one- two years. This suggests that IFAs have a “use by date”.

IFA users are generally satisfied with the services they receive from their IFA, with tax efficiency remaining the most popular service. However, satisfaction with IFAs in relation to market and product advice has decreased whereas satisfaction with general money advice has increased.

The key benefits of using an IFA remain that they research the whole market, are a trusted opinion and advice source, are confident making investment decisions, save time, spot new and emerging investment opportunities and save money by getting the best value products available. There has, however, been a marked drop in the number of investors seeing their IFA as a trusted source of opinion and advice.

Investors are reluctant to buy new products in the short term but neither do they want to withdraw funds and realise potential losses. With three out of five believing that the economic slowdown will last for another 12-24 months, it remains to be seen what this will mean for the savings and investment industry.

Mona Patel is head of communications at the Investment Management Association

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