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SMART steps

30 March 2016

BlackRock research shows that Britain’s smartest investors have some common habits and the confidence to seek out alternatives to cash.

Nearly three quarters of ‘mass affluent’1 Britons say it’s important for them to earn an income on their investments, yet they still allocate more than two thirds of their assets to cash – 20% more than even they acknowledge they should.

This is according to the latest BlackRock Global Investor Pulse Survey2, which reveals the financial issues people care about most and how they directly influence investor behaviour.

With so many people in the UK resorting to the safety of cash, the report finds that, perhaps unsurprisingly, a third of them are concerned about outliving their savings in retirement.

Get smart

Yet the BlackRock survey also identifies a group of people who are more confident to step out of cash in the search for higher returns. Making up 8% of the UK survey’s 4,000 respondents, the global fund manager identifies these individuals as SMART investors. They exhibit behaviours that everyone could arguably learn from; interestingly, they can be found across all of the age and income brackets.

SMART investors have received the name on the basis of their five key investment habits. They:

  • Save and invest more
  • Make retirement a priority
  • Actively invest for income and growth
  • Recognise the need to spread their investments
  • Take planning and financial advice seriously

Sure-footed

Because SMART investors are more likely to seek advice than the average Briton, their cash exposure is much lower than the average. Nearly half of them use a financial adviser, almost three times the national average. It’s perhaps not surprising, therefore, that eight in ten are confident they are making the right financial decisions, compared to only half of Britons in general.

The survey shows that nearly two thirds of respondents liken investing to gambling, whereas the behaviour of SMART investors indicates that they do not make the same comparison. They actively invest for income and growth and diversify their portfolios to a much greater extent. Almost all (97%) of SMARTs have both savings and investments, compared to only 41% of Britons, and they are four times more likely to have a Stocks & Shares ISA than the 7% national average.

In an ideal world, Britons would like 39 years to save for their retirement. In the real world, many put it off until well into their 30s or even 40s, while around one in five never start saving at all.

In contrast, when it comes to retirement, more than half of SMART investors say that putting money away now is a priority, compared to just one third of average Britons.

Crucially, the great majority (86%) of these more savvy investors have started to save for retirement, a much higher proportion than the UK average of 60%.

Healthy habits

The habits of SMART investors explain why they are more than twice as likely to feel positive when investing.

It is, of course, important to remember that moving out of cash in search of higher returns will involve accepting a greater risk to both income and capital. But many would be wise to follow the example of Britain’s SMART investors, by making an early start to saving and recognising the need to diversify their assets, in order to help achieve financial security in the years ahead.

 

The value of an ISA with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than invested. An investment in a Stocks & Shares ISA will not provide the security of capital associated with a Cash ISA. The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

1 Mass affluent investors are defined as either having £100,000 personal income, £150,000 household income or £100,000 investable assets.

2 BlackRock Global Investor Pulse Survey, December 2015

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