Financial advisers have a responsibility to gen up on alterative asset classes when their clients are seeking higher than average returns.
The gloomy economic outlook has led to more investors taking an adventurous approach to their investment strategy and considering higher risk asset classes for better returns than traditional asset classes, such as equities.
That said, investors with higher expectations may be missing out on the best available investment returns because financial advisers are unfamiliar with the more complex, higher risk asset classes such as bloodstock investment.
According to an independent survey of financial advisers conducted on behalf of our behalf recently, almost all respondents (96.3%) have clients with a portion of their portfolio dedicated to higher risk assets.
Nonetheless almost half (48%) of those polled described their knowledge of alternative investment classes as “poor” or “average”.
The survey drilled down even further into the detail, revealing that less than one in five (19%) financial advisers had advised customers on bloodstock investments.
The survey findings highlight a gap between investor expectations for higher returns and what financial advisers are able to deliver, with intermediaries admitting that their knowledge of certain asset classes is “lacking”. Just 7% of respondents said their knowledge of the alternative investment universe was “excellent”.
More than four-fifths (81%) of advisers indicated that they had not discussed bloodstock investments with their clients, with almost two-thirds (59%) saying that they did not feel they knew enough about the asset class to advise clients correctly.
Almost half (48%) of advisers were also unaware that bloodstock investments qualify for inclusion in tax-efficient Enterprise Investment Scheme (EIS) structures, despite the majority (78%) previously advising clients on an EIS schemes.
This lack of awareness may result in investors losing out on higher returns. More than two thirds (67%) of advisers surveyed said that they had to “lower clients’ return expectations” in the past year due to lacklustre returns from more traditional asset classes.
With a clear knowledge gap when it comes to higher risk allocations, it’s the financial advisers’ responsibility to be keep themselves informed and consider all the available options in the market.
It may come as a surprise that in the 2017/2018 season, our investors received net profits of 12% after deductions. This was dwarfed by the 23% return in 2016/2017 and 30% in the year before that.
Of those advisers surveyed who had recommended a bloodstock investment, their experience was for the most part a positive one for clients, with the majority stating that their clients had achieved “good” returns after investing an average of £26,000.
Take a look at our survey to find out more.