What comes to mind when someone mentions the stockmarket? We asked a large sample of UK consumers as part of our regular attitude to risk questionnaire update.
Every two years we do an update of our questionnaire, making enhancements based on research and client feedback, and recalibrating against responses from a sample of over 2000 UK consumers. From time to time, we ask a few additional questions to the respondents to consider different aspects of risk tolerance.
This year we asked what word came to mind in relation to the idea of investing in the stockmarket. We show the results in this word cloud – where the size of the word represents how common it was in the responses. Risk and gambling come to the fore. There are also plenty of negative associations: bankers, greed, confusing… (and we removed a few expletives.)
This chimes with the results we get from our attitude to risk questionnaire. The UK population is fairly risk averse and by no means keen on stockmarket investment. Only 29% of consumers with an income above £25k agree or strongly agree with the statement “I feel comfortable investing in the stockmarket”. More than half disagree.
Many of the consumers who are risk averse probably have more capacity to take risk than they think, and many will need to take risk to meet their financial goals. The reconciliation of risk attitude, risk capacity and required return is a key part of the value added by a skilled financial adviser. Our attitude to risk questionnaire can help bring structure to this conversation between adviser and client.
We continue to analyse the data from our 2020 update and will share more insights in future blog posts.