Investment Markets




	Insurance Marketing Department

	Everyone has seen how recent stock market events round the world have shattered investors’ confidence. Sales of ISAs and other investments traditionally used by many consumers are down and signs of recovery are weak, even though markets themselves show sporadic signs of recovery. This article looks at some steps advisers might take to encourage investors to return to the market. The opportunity It is often said that most retail investors tend to buy at the top of the market and sell at the bottom. This is probably unfair as a criticism – even if true – since retail investors seldom have the same information as insiders and have to rely on press reports for their information about how markets are performing. And, of course, one of the traditional ‘safe houses’ for investments – with profit funds – have recently come under attach as the diversity of their investment strategy has been inadequate to protect investors against a severely adverse equity market and ‘smoothing’ has started to work against investors. Many feel that it will continue to do so for some time to come. But this is just the time when investors need to be reassured about the future of their investment portfolios; after all realising equities now is likely to result in an irrecoverable loss of more than a third, compared with the heady days of January 2000. Of course, holding on to investments now can be a difficult decision for those concerned that they have already shown a (paper) loss that can be running into many thousands of pounds. And the thought of increasing savings could appear unattractive, to say the least. Yet, if we look at the fundamentals of investment, it should be clear that the FTSE100 at 4,000 points is likely to represent a far smaller risk of loss than the FTSE100 at 7,000 points; after all, a market that has already lost 30% of its value is unlikely to lose the same amount again, especially if the fundamental economics underlying the market are broadly sound. Those who currently show book losses due to the fall in markets have the opportunity to see a recovery, as long as they do not have to realise those losses, either as the result of urgent need, or because a fixed investment period is coming to an end. Similarly, those who are able to invest now have the chance to share in what most consider as being an almost inevitable recovery, when equity markets are seen in their historical perspective.

There are, of course, no guarantees; that is the nature of risk. But looking at a well constructed investment strategy that takes into account potential risk with possible reward, over a time-frame that suits the investor and offers suitable diversity of asset allocation and asset selection can be expected to offer your clients a worthwhile return in the future.

So now can be the time to start looking forward again, before the big battalions of direct selling fund managers and insurance companies realise that investors are soon likely to reach the point where they realise that they must start planning for the future again – and that there are good economic reasons for doing so.

Looking at your client bank should allow you to identify those investors who have not made any changes to their investments for some time. Where they have more than five or six years before there is likely to be a need for capital, then a return to equity investments now could be a good idea for them.

A simple campaign can be run to contact them by e-mail or letter – possibly backed by a simple leaflet or e-brochure – setting out the positive reasons for taking action now. After all it is in the interests of clients that they should return to the investment arena, if they are not to be left without adequate resources in future. But this is unlikely to be enough in isolation; after all, there is not only an education process to undertake, but also considerable inertia – even resistance – to be overcome and clients must understand the need for careful planning. It is therefore recommended that the campaign should be reinforced by other activities, including newsletter articles – delivered by e-mail or more traditional methods – and personal contact.

If you would like to put together a campaign to encourage clients to re-enter the investment arena through a structured approach to asset allocation and stock selection, please contact us.