Baby boomers are risk averse and lack the confidence and knowledge to manage their investments, according to new research.
Despite the fact that the baby boomer generation – now aged between 55 and 73 – own a third of the UK’s wealth, many report a significant aversion to risk.
The survey by Aegon, found that almost one in two (44 per cent) baby boomers prefer to avoid risk, while 39 per cent said they had “zero” appetite for risk.
A further 32 per cent stated that being financially cautious is incredibly important to them. These figures were significantly higher when compared to younger age groups.
Wealth in the older age bracket is primarily driven by the value of property, pensions and savings. Aegon says this aversion to risk may mean they are missing out on potential investment gains – particularly as many in this age group are utilising pension freedoms.
Looking at the reasons for this, over a quarter (26 per cent) of baby boomers said that concerns about making a wrong investment decision impacts their attitude to taking risks.
Despite this, just one in four (25 per cent) in this age group have sought advice from a financial adviser.
The research also shows that baby boomers lack confidence that their chosen investment strategies will deliver strong returns over the next five to ten years, with just 3 per cent highly confident that this will be the case. Again this figure was higher among younger investors.
More worryingly, one in five (20 per cent) baby boomers said they didn’t know what they would view as a “good return” over a 10 or 20 year period.
Aegon’s investment director Nick Dixon says: “Even though baby boomers have accumulated the most wealth, they are at risk of excessive caution and exposing their hard earned money to stagnation.
“Not only will growth potential be reduced, but the impact of inflation on savings held in cash or very low risk investments means that what those savings can buy will fall over time.”
He says some in this group are falling into the trap of holding excessive amounts in cash, which can create a false perception of risk control.
Dixon adds: “The reality is that many baby boomers, in retirement or nearing that point, are ‘sleepwalking’ into poor financial decisions as a result of failing to seek financial advice.
“Taking measured risk is essential to generate decent investment returns. Good financial advice can build confidence and improve understanding of risk to inform investment decisions that best suit an individual’s life stage and goals.”