How much return would investors like from their portfolio?
Investors in Australia have among the highest return expectations in the world, according to Natixis Investment Managers.
The firm’s biennial global survey of individual investors found Australian investors expect to see long-term return expectations of 10.8 per cent above inflation.
This was the seventh-highest expected return out of 18 countries surveyed.
On the other hand, Australian financial professionals estimated they could achieve a return of 8.9 per cent above inflation, which represents a 22 per cent expectation gap with the respective individuals.
The greatest expectation gap was 104 per cent in the UK where individuals targeted returns of 10.2 per cent, but advisers expected to only achieve 5 per cent.
Natixis flagged this optimism at their expected returns is at odds with individuals’ risk tolerance, with 83 per cent of investors globally describing themselves as “conservative” or “moderate” investors and just under half (47 per cent) of investors saying they would feel uncomfortable about taking on additional risk.
One way of generating additional returns is via investing in private markets, but individual investors were equally divided over whether the returns were worth the higher fees for those products. Some 40 per cent said they were already invested in the assets, but 56 per cent said they were concerned about the liquidity of the products.
“With the uncertainty of today’s macro/market environment clouding their financial prospects, individuals are struggling to find clarity on what to do next. Faced with an unfamiliar market environment, they need help rationalising their return expectations with their appetite for risk and understanding what higher interest rates mean for their investments. They also need a better understanding of which investment opportunities are right for them now,” Natixis said.
Looking at the investor-adviser relationship, 91 per cent said they trust their financial adviser when making financial decisions and also value having someone who understands them and their financial situation.
Around a third said they are working in partnership with their adviser, and 31 per cent said they make financial decisions based on their adviser’s recommendation. They are also seeking help beyond their investment portfolios, with 46 per cent wanting help in areas such as retirement income planning and financial planning services.
AUTHOR
Laura Dew
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