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New research by Octopus Investments provides fresh insight into how advisors view their clients’ ISA habits.

In the survey of financial advisers1, three-quarters of respondents said they believe their clients hold too much in their cash ISA relative to the rest of their portfolio. The majority (83%) feel their clients are put off investing in stock and shares due to the risk of losing money, followed by concerns of an overstretched (49%) and volatile (46%) market.

Advisers are correct in this assumption, with only one in seven (15%) adults planning to invest in a stocks and shares ISA this coming tax year (2018/19), according to a parallel survey of UK adults2. While an equal number are concerned over losing money (33%) and volatility (32%), many also worry about the level of returns (20%). Some do not feel they are informed enough on the market (23%).

These anxieties aren’t restricted to the stock market. While 48% are planning to invest their ISA allowance this coming tax year (2018/19) in cash, low-interest rates are deterring many savers – nearly two-thirds (61%) listed returns as something that has or would put them off investing more in a cash ISA next year. The recent research suggests that both advisers and their clients are struggling to find a solution that they are comfortable with for their ISA planning.

Paul Latham, Managing Director of Octopus Investments, said:

 “It seems like Britons have an uneasy relationship with their ISAs. While cash unsurprisingly remains a favourite, our research shows that holding too much cash within an ISA seems to be a concern for many advisers and investors alike.

“But at the same time, there seems to be a widespread reluctance on the part of investors to put their ISA pot to work in the stock market – driven by concern around market volatility and the prospect of returns outweighed by the fear of loss. You could say that investors are stuck between a rock and a hard place…

“Understanding the full suite of ISA options out there has arguably never been more important. Beyond cash and stocks and shares, alternative ISA options like the Innovative Finance ISA could prove helpful for those clients who want the potential of attractive returns outside of equities.

“People should view an ISA for what it is – a tax wrapper under which they can hold a range of investments. Whether that be cash and stock and shares, as well as VCT and P2P products. Octopus Choice, for instance, invests in property-backed loans to target a return of around 4%, with a minimum investment of as little as £10.”

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 Notes to editors:

  1. Octopus Investments carried out an online survey of nearly 600 UK advisers from 20 December 2017 to 10 January 2018.
  2. Opinium carried out an online survey of over 2000 UK adults from 28 December 2017 to 2 January 2018

About the Innovative Finance ISA

At Budget 2014, the Chancellor announced that peer to peer loans would become ISA qualifying investments. Following a consultation on the implementation of this measure, it was confirmed that peer to peer loans would be eligible for a new type of ISA (the Innovative Finance ISA) at the Summer Budget 2015.

It was launched on 6 April 2016 with the aim of increasing the choice and flexibility available to ISA investors while encouraging the growth of peer-to-peer lending and improving competition in the banking sector by diversifying the available sources of finance.

Investors can divide their ISA allowance (currently £20,000 for the 2017/18 tax year) across multiple forms of ISA including, but not limited to cash, stocks and shares and Innovative Finance ISAs as they wish – but can only open one of each type within each tax year.

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For journalists in their professional capacity only. The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest. Past performance is not a reliable indicator of future results. Money invested through Octopus Choice is concentrated in loans backed by property and could be affected by market conditions. For the same reason, instant access to invested capital cannot be guaranteed. Peer-to-peer investments are not protected by the Financial Services Compensation Scheme (FSCS). Personal opinions may change and should not be seen as advice or a recommendation. We do not offer investment or tax advice. We recommend investors seek professional advice before deciding to invest. Octopus Choice is provided by Octopus Co-Lend Limited, which is authorised and regulated by the Financial Conduct Authority (722801). Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 3942880. Issued February 2018.

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