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Schroders Global Investment Trends Survey 2015

In the Schroders Global Investment Trends Survey 2015 we have captured retail investor confidence, opinions and investment intentions from a comprehensive survey of over 20,000 investors in 28 countries around the globe. The investors we polled are ‘active investors’ in that they have at least €10,000 (or local currency equivalent) to invest in 2015 and they are prepared to make a change to their investments over the coming 12 months.

Global growth indicators show that the world economy continues to recover from the global financial crisis, and this is reflected in investors’ confidence, expectations and intentions. A thirst for income – but disconnect between expectations and risk appetite The strongest trend emerging through the survey is the thirst for income with 87% looking to invest in assets to generate income. This is unsurprising given record low interest rates in the world’s major economies. However, the research reveals a disconnect between investors’ expectation of double digit returns and their appetite for risk, with many favouring shorter-term and lower-risk investments. With many drivers of change for the global economy and markets on the horizon, it is surprising that the survey showed that less than one-in-four investors will seek professional financial advice this year, with more than a third of investors intending to invest in the same way as they have done in previous years. We believe investors need to carefully consider their risk profile, investment time horizon and lifestyle objectives before they plan their asset allocation in the coming 12 months.

Go online for the full results

Investors need to shape their portfolios in order to achieve the returns they expect.

Empowering investors through intelligence
At Schroders, we believe that deeper understanding delivers better investment decisions. So to support the results from our Global Investment Trends Survey we’ve developed incomeIQ to help you talk with your clients about investing for income.

With incomeIQ, you can gain valuable insights into whether a client’s choices could be affected by personal biases, such as an over-optimistic viewpoint or the influence of friends and family. This is driven by simple multiple choice questions which should take no more than 5 minutes to complete. You’ll also find a wealth of information for you and your clients about income investing along with details of our rated* range of income solutions.

Behavioural finance: another investment dimension
As a financial adviser, developing an in-depth understanding of what makes a client tick helps you to provide the highest quality advice. When developing an investment plan, there are the fundamentals to consider - investment objectives, attitudes to risk and time horizon. But understanding how someone makes decisions can be just as important, although this will not always be so easy to pinpoint.

We all make choices that don’t make sense – it’s human nature. This is down to ‘behavioural biases’, the inherent tendencies we all share that can lead us to react to certain situations in irrational ways. Behavioural finance is an area of academic study which examines these biases by applying cognitive psychology to economics and finance, helping to explain why people are prone to making irrational financial decisions. Maybe your clients are over-confident in their own financial acumen? Our recent research found that 95% of investors are confident in their ability to make sound investment decisions, highlighting the prevalence of ‘overconfidence bias’, whereby people generally overestimate their investment ability.

Over-optimism can give a client an unrealistic view of their future financial well-being. By altering their perception of market risk, it can lead them into making irrational investment decisions.

Or perhaps a focus on the present is negatively affecting their plans for the future? Of the investors we surveyed, 46% favoured a short-term approach that generates returns in under two years, while only 12% preferred a long-term approach. This demonstrates how often ‘present bias’ leads investors to focus on the here and now rather than the future.

Present bias refers to a person’s preference for a reward now rather than a larger reward later. This short-term view can make it difficult to save for the future.

Another common tendency is to make decisions about future financial requirements without considering how life changes, known as projection bias. A client might for example estimate their retirement income needs based on their current circumstances without considering how their lifestyle is likely to change. Imagine how much your clients’ finances could benefit if their decisions were based on insight rather than instinct. Schroders incomeIQ is designed to help your clients achieve just that.

The incomeIQ test
Working with Joe Gladstone, behavioural scientist and PhD researcher at the University of Cambridge, we have created a simple test that will help your clients uncover their behavioural biases in 10 simple questions, and give them tips on how to overcome these when making income investment decisions.

We recommend that you encourage your clients to take the incomeIQ test and analyse the results with you. The insights gained from the test will enable you to gain a deeper understanding of your clients’ behaviour, stimulate more meaningful conversations around their income goals and, ultimately, help you develop a more holistic investment plan.

And while you may already be aware of the principles behind behavioural finance, why not take the test yourself and see what you discover?

Help your clients become empowered income investors today.



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Schroders Global Investment Trends Survey 2015
In the Schroders Global Investment Trends Survey 2015 we have captured retail investor confidence, opinions and investment intentions from a comprehensive survey of over 20,000 investors in 28 countries around the globe.

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