Advice opportunities with the mass affluent

Covid-19 presented a once in a generation event, causing a seismic shift to the finances, needs, and priorities of the UK population. Since the start of the pandemic LV= has been conducting research into the UK population’s financial and wellbeing trends, and publishing our findings in the quarterly Wealth and Wellbeing report.

The report released in July 2021 featured questions on respondents plans for the next 12 months, at-retirement options, and experience of financial advice. The survey highlighted some key trends and some stark knowledge gaps. 

A key group for many advisers are mass affluent individuals; those with assets of £100,000 to £500,000 (excluding property) who remain in a precarious financial position if those assets are not managed carefully, particularly as they head into retirement. So, how are the mass affluent faring?

Post-lockdown priorities

As lockdown lifted and summer weather arrived, we asked what mass affluent respondents were planning for the next 12 months. Perhaps unsurprisingly, holidays came out on top with 45% stating they are planning one.

The mass affluent client remains an opportunity; even after the difficulties of 2020 they have money to spend. However, they want to do this in a considered way – other priorities were being more environmentally conscious (26%), saving more (23%) and making up for lost time with friends and family (27%). They are also keen to have a better work/life balance (17%).

Retirement planning opportunities

Whilst we see the mass affluent remain financially comfortable (with enjoying themselves and socialising top of their agenda) we also see trends that tell us, unsurprisingly, that this group could benefit from financial advice.

One major finding of the research was that married couples aren’t planning their retirement together. We discovered only 36% had discussed retirement finances with their partner, and 78% were not aware of the tax efficiencies of planning together. This presents a clear advice opportunity, as 66% stated they have two or more pensions (excluding the State Pension).

Of further concern 1 in 2 said they know ‘little or nothing’ about how to ensure their spouse will be left with enough pension income if they were to pass away.

The advice knowledge gap

You might think our mass affluent respondents believe the answer to this is to visit a financial adviser, however only 29% regularly see one. The primary reason for those currently without an adviser? ‘I can make financial decisions on my own’ (46%).

We also asked if respondents planned to get financial advice when they retire – only 52% said yes. Perhaps this figure indicates a good understanding of the options at retirement? Well, 59% of those with pensions said they know ‘little’ or ‘nothing at all’ about their retirement options. Worryingly, 60% know little or nothing about the effect of stock market fluctuations on their pension savings and 54% even said they know little or nothing about how to ensure they don’t run out of money in retirement.

This reluctance to engage with advice might come from, as we discovered, a misunderstanding about the role of an adviser.

43% believe one might visit an adviser to know what to do with a large sum of money, 44% for inheritance planning, and 12% thought advice was ‘for people with more money than me’. It seems the benefits of advice at, or nearing, retirement are being missed by many.

The mass affluent question

The mass affluent present a dilemma. Research indicates they feel they can make financial decisions for themselves, and yet we see glaring gaps in their knowledge, particularly around retirement options.

It would be all too easy for poor planning (or none at all) to result in damaging losses for this group. While taking good financial advice, and engaging in careful planning, could propel them beyond the mass affluent category. The question is, how do we articulate that to a group that think they can go it alone?

A possible option for those who do seek advice and are nervous of subjecting their hard-earned money to investment risk is smoothed funds. Designed for investor composure, they aim to provide protection from market shocks, shield against sequence of returns risk and provide a calmer investment journey, all while still delivering strong, steady returns.

The LV= Smoothed Managed Funds, featuring our unique and proven smoothing mechanism, can limit the impact of stock market fluctuations and provide a less daunting experience for mass affluent investors. On investment in our Pension, clients’ investments are ‘smoothed’ from day two. Clients can also access our funds through their own SIPP or SSAS via the LV= TIP.

To learn more about LV= and our smoothed fund range, look out for our upcoming webinars with In Partnership, or visit our website lvadviser.com/smoothed- investments.

You can also visit the Wealth and Wellbeing research hub

Statistics all taken from the LV= Wealth and Wellbeing Monitor, July 2021 edition. Research conducted via Opinium Research in June 2021 4,000+ nationally representative UK adults surveyed of which 500+ were mass affluent (they hold £100,000 to £500,000 in assets excluding property).