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Pensions freedoms and Brexit create heightened demand for alternatives, but knowledge gap still a factor

Survey of mass affluent finds investors taking advantage of pensions freedoms to diversify into alternative assets.

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A new survey by YouGov has revealed that nearly half of mass affluent Britons who benefitted from pensions reforms in 2015 say that this is because they now have greater control over their own investments. The survey encapsulated 506 adults with investable assets of at least £100k.

28 per cent of respondents said that they enjoy being able to withdraw their pension at a lower tax rate, while one in five felt that this allowed them to diversify more readily into tax efficient investments.

11 per cent said that they were interested in investing in private equity funds, with 9 per cent interested in startups. Younger investors seemed the more adventurous, with 19 per cent of those under the age of 34 describing themselves as more willing to invest in the sector post-Brexit. 

Online platforms were the most popular channel for investors seeking access to alternative investments, with 35 per cent opting to use these. The number rose to 44 per cent when assessing only those aged up to 34. But financial advisors continue to play a major role for many. 32 per cent of investors would still prefer to act via a financial advisor when accessing alternatives for the first time. One in five respondents selected funds as their preferred mode of access to the sector.

The primary drivers for those interested in alternative investments were the pursuit of higher returns (40 per cent) and tax efficiency (38 per cent). 33 per cent of those interested in the sector cited a desire to diversify their assets as a key motivation.

By far and away the biggest barrier for those hesitant to look at alternative investments was a lack of knowledge about the sector, with 55 per cent of the vote, while 36 per cent of respondents cited concerns about risk.

“There remains some lack of understanding surrounding alternatives,” said Charles Owen (pictured above), founder of CoInvestor – an alternative investment platform which allows individuals to invest in unlisted companies alongside fund managers. “Technology has fuelled the growth of a number of online platforms that now enable private investors to access asset classes that were previously exclusive. Financial advisors should be making it an absolute priority to work closely with these platforms and provide solutions for clients that allow them to diversify their portfolios and reap the benefits of this third asset class.”

“If financial advisers do not adopt these technologies they risk losing relevancy, especially amongst a growing, online-savvy younger investor audience that should be their next generation of customers.”

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