BRITONS are holding onto too much cash in their ISAs instead of taking bigger risks with their money, according to new research.
A recent survey from investment firm Octopus Investments found that 75 per cent of financial advisers believe their clients hold too much in their cash ISA relative to the rest of their portfolio.
The survey of almost 600 advisers, carried out between 20 December 2017 and 10 January 2018, found that 83 per cent of financial advisers’ clients were put off investing in stocks and shares because of the risk of losing money.
Worries about an overstretched and volatile market also ranked highly among investor concerns.
A second study of more than 2,000 people in the UK over a similar timeframe by Opinium found that only 15 per cent of adults planned to invest in a stocks and shares ISA in the 2018/19 tax year.
Investors will no doubt feel somewhat vindicated in their pessimistic views after the last few trading sessions. Global stock markets have tumbled over the last few days, with the FTSE 100 down two per cent on Tuesday and the US Dow index closing on Monday after its worst session in six years.
However, keeping money in a cash ISA is also proving to be a concern for UK adults, with 61 per cent of respondents citing low returns as a reason they would be put off from investing in a cash ISA in the coming tax year.
This suggests that investors and their advisers are struggling to find a solution that they are comfortable with for their ISA planning, according to Octopus Investments.
“It seems like Britons have an uneasy relationship with their ISAs,” said Paul Latham, managing director of Octopus Investments. “While cash unsurprisingly remains a favourite, our research shows that holding too much cash within an ISA seems to be a concern for many advisers and investors alike.
“But at the same time, there seems to be a widespread reluctance on the part of investors to put their ISA pot to work in the stock market – driven by concern around market volatility and the prospect of returns outweighed by the fear of loss. You could say that investors are stuck between a rock and a hard place.”
Latham added that there is a wide range of products that can fit into an ISA, including peer-to-peer investments, which can be held in an Innovative Finance ISA.
“People should view an ISA for what it is,” he said. “A tax wrapper under which they can hold a range of investments. Whether that be cash and stock and shares, as well as VCT and P2P products.”