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Brits bemoan sleepless nights over rising inflation fears

But advised clients more confident their finances will hold up against cost of living crisis

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Advisers can be the answer to Brits’ mental health troubles during the current period of financial insecurity.

According to a 2,000-person survey by Charles Stanley, 30% of UK adults are consistently anxious about the current economic environment.

One-in-ten (11%) are having panic attacks, and 22% are having sleepless nights. This is resulting in physical symptoms; 9% said their hair is falling out/thinning from thinking about the cost of living crisis, and 8% have lost weight.

Some 55% of Brits said they are not confident their finances will hold up against the rising cost of living. Of this, 34% said they are not very confident and 21% say they are not at all confident. This surges higher among women, with 63% saying they’re not confident compared with 47% of men who say the same.

Just under two-thirds (62%) of adults who do not have a financial adviser are unconfident that their finances will hold up against the rising cost of living, compared to 48% of adults who do have an adviser who say the same.

Lisa Caplan, director of Charles Stanley’s hybrid service OneStep Financial Plans, said: “Financial advice can play a considerable role in helping boost consumer’s financial confidence.

“Particularly in the current economic climate, advisers can help empower individuals in understanding how to manage their money and ensure they are aware or have the best products and services in place that meet their financial needs, in addition to giving them peace of mind that they are being supported in reaching their life goals or ambitions. It is about balancing often competing priorities and understanding the effect of the short term on the long term.”

Communication

To back up the power of the financial adviser, research from Abrdn has found 85% of UK advisers have spoken with their clients in the last six months about how to adapt their finances or portfolios in the wake of soaring inflation.

A fifth (22%) of advisers have spoken to all of their clients about the impact of inflation on their finances, while just 12% have yet to discuss changes with any.

To help clients manage the effects of inflation, advisers are most frequently altering pension drawdown strategies to reduce tax liability (23%) and adapting their investment portfolio to decrease risk (21%).

Some 17% have also discussed a wider range of annuity options, while 14% have adjusted retirement income plans.

Jonny Black, commercial and strategic director of adviser and personal at Abrdn, said: “Advisers are yet again supporting clients in another challenging environment. Many will not have experienced the record levels of inflation we’re currently living through, and I’d expect to see more people seek professional advice for the first time this year.

“People want to know how to mitigate the impact of inflation on their finances, but also to better understand why the economy is in this position in the first place. This underlines the value of advice. Advisers help clients answer the hard, technical questions, but also help put their minds at ease in difficult times.”

Emergency funds

Dealing with the current economic climate is not easy – but can be eased with an emergency fund, which is an accessible savings pot which is set aside specifically for use in emergencies, not regular savings or investments.

According to Charles Stanley’s survey, 71% of UK adults have an emergency fund.

Men are slightly more likely to have one (74% vs 68% of women), as are those who have previously had financial advice. Of those with an adviser, their funds would last an average of 4.7 months

Of those without an emergency fund, 27% can’t afford one, 22% are trying to pay off debt, and 14% haven’t had a chance to set one up. Some 83% of those without an emergency fund think they should have one; just 17% think it’s unnecessary.

Education problem

The report also found there is a “concerning lack of understanding” of the key drivers of change on everyday finances – which are likely to be improved by financial education and financial advice.

Two-in-five (41%) do not understand the impact inflation has on the value of cash savings.

Some 10% believe it increases the value of cash savings, 9% said it doesn’t affect the value of cash savings and 22% also admitted they don’t know what impact inflation has on their cash savings.

Caplan added: “There is a clear lack of financial literacy around inflation, which is especially concerning given the rate it is currently increasing.  Thousands of consumers have been used to a low inflationary environment over the past decade, but the lack of awareness and understanding over the huge impact it can have on daily expenditures, such as food, petrol prices or energy bills, and long-term personal finances is alarming.

“Inflation is a notorious bogeyman for savers, and consumers are in for a significant shock if they don’t truly understand the impact it can have on their finances.”

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