Inflation and your clients

ended 16. November 2021

Tomorrow morning at 07:00, the Government is publishing the latest CPI inflation data. We want to know:

  • Are you proactively approaching your clients about inflation?
  • Do people have to go up the risk curve to have a chance of keeping their returns real in the current climate?
  • Are you seeing usually cautious clients take on more risk in an effort to keep their returns real?

Any other observations, jot them down, but please don't write an essay. Two pars max!

3 responses from the Newspage community

Star Quote
"The inflation challenge is the biggest issue we've faced with our clients since 2008 in terms of their investment strategies. This is a far bigger issue than the Covid-related sell-off of March 2020, which was definitely scary at the time but was always going to be temporary. How can we recommend having 40%-50% exposure in bonds, which is the traditional proportion for 'Balanced' and 'Cautious' clients, in an asset class that is almost guaranteed to lose money as inflation kicks in and interest rates start to rise? The key issue is that it also has a greater impact on the people who don't want to be taking on more risk, those naturally 'Cautious' clients or those looking for security of their capital. We are looking at many different asset classes to offset some of this. We generally are advising an increase in cash holdings but also looking at Gold, REITs and other income-producing investments that will benefit from inflation rises."
"We are speaking with existing and new clients about the impact of inflation. We illustrate the real return, after inflation, of their investments. This is particularly important to illustrate when inflation is riding high. It is not appropriate for clients to increase risk in order to get real returns, as with a sensible investment strategy they will ride the inflation curve in any case. We are seeing clients who would not have considered investing money opting to invest due to the combination of higher than usual rates of inflation and lower than usual bank rates."
"Inflation is the biggest threat to your wealth over the long term. We always make sure to factor the increase in the cost of living in our projections with the families that we look after. This helps illustrate how important it is that your life savings grow faster than the rate of inflation. Some who have previously seen bank accounts as a safe haven now realise that this is in fact one of the worst places to leave your wealth, and that a well-diversified investment portfolio is the way forward."