UK savers set to seek investment opportunities away from cash

RISING inflation may provide alternative finance firms with an opportunity to entice usually-conservative savers, as the vast majority of financial advisors expect Brits will move some of their cash deposits into other asset classes to prevent their cash value being eroded.

Two third of advisors think cash will lose its safe haven status and 70 per cent of them believe their clients will move part of their capital into more profitable products, a study commissioned by Investec Wealth & Investment showed on Wednesday.

Cash deposits are in fact returning way below the current level of inflation.

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Average cash ISA rates have halved from 0.87 per cent to 0.43 per cent since the Brexit vote, following an opposite trajectory to core inflation, which surged by two per cent in the year to February, to 2.3 per cent.

“Whilst interest rates had remained at historic lows for eight consecutive years alongside negligible rates of inflation, cash has retained its reputation as a safe if rather unexciting asset class,” said the firm’s head of intermediary services Mark Stevens.

“However, with inflation rising significantly in recent months, many advisers believe their clients’ patience with cash will start to wear thin as they see their deposits shrinking in real terms.

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“It’s likely that as clients become receptive to moving higher up the risk ladder in order to generate positive returns, the role of the adviser becomes even more important.

“This creates another opportunity for advisers to work closely with their discretionary investment manager partners to deliver inflation-adjusted returns for those investors with large a portion of their assets held in cash.”

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