High-Net-Worth Individuals’ confidence in economy falls

High-Net-Worth Individuals (HNWIs) are more concerned about the future of the economy than their own finances, online security or physical safety, according to the third Saltus Wealth Index report.

Working with Dr Michael Peacey, Senior Lecturer at the University of Bristol, Saltus and Censuswide surveyed more than 1,000 people in the UK with investable assets of over £250,000.

Currently the Saltus Wealth Index stands at 59.5 out of 100 – a fall of 8.2 points and 12% compared to the previous Index score of 67.7 – demonstrating that HNWIs’ outlooks have fallen considerably in the last nine months.

Every single measure that comprises the Index has fallen, some more than others, with HNWIs’ confidence in the UK economy taking a notable hit, and concerns about the impacts of inflation and soaring energy costs rising significantly.

Michael Stimpson, Partner at Saltus, said:  “The Wealth Index has dropped significantly over the last nine months but, given we have seen the highest inflation levels in 40 years, interest rates climbing approaching levels that predate the global financial crisis, three prime ministers, four different chancellors, and several budgets, that should not come as a great shock.

“Though it is encouraging that, while HNWI confidence in the UK economy has dropped, more than two thirds (67%) remain positive.

“Yes, HNWIs do have concerns about the impacts of inflation, interest rates and the ongoing war in Ukraine on their wealth, but the vast majority remain confident, and those confidence levels stand significantly higher among those who take financial advice, highlighting more than ever importance of having a robust financial plan in place.”

According to the research, most HNWIs are worried about something – just 3% say they are not – and the biggest concerns by quite a margin are their own health and the state of the economy.

One in nine (11%) cite the state of the economy as their biggest worry, while 17% say they feel ‘unconfident’ about the next six months – up from 10% in the last Wealth Index.

When asked about the three biggest risks to their wealth, HNWIs cited inflation, rising energy costs and the war in Ukraine as their top concerns.

Overall, one in three (33%) respondents said inflation was a key concern, but this almost doubles to 60% amongst HNWIs over 55.

Older respondents are also more likely to be concerned about rising energy costs, with 45% citing these costs as a key concern.

While the war in Ukraine (24%) and other geo-political risks (10%) are cited as top risks to their wealth, a change in the political landscape at home is seen as less of a risk by respondents.

Just one in seven (14%) cited ‘any change in Government in the next election’ as one of their top three worries.

The research also revealed that the vast majority of HNWIs (60%) feel anxious about their money, with younger people (73%) much more likely to feel anxious than older respondents (26%).

However, while overall older HNWIs are less likely to feel anxious about their money, the proportion of those in that demographic that do has risen.

In the first Wealth Index (October 2021), 18% of respondents aged 55-64 agreed with the statement ‘my money makes me feel anxious’, by the second Wealth Index report this had risen to over one in five (24%) among 55+ year olds and it has now risen again to over one in four (26%).

In the last Wealth Index, when asked how confident or unconfident they felt about the UK economy over the next six months, 77% felt confident, and of those, 29% felt ‘very confident’.

Now, the number feeling confident has dropped to 67%, with 27% feeling ‘very confident’.

And, while anxiety about money remains, overall HNWIs are more likely to say that their money gives them freedom than makes them feel anxious, suggesting that despite marked concerns, HNWIs’ financial outlook remains largely positive.

Dr Michael Peacey added: “The Wealth Index has fallen eight points from 67.7 to 59.5, and every single measure that enters the Index has fallen – demonstrating that HWNIs’ outlooks have fallen considerably.

“Unsurprisingly, concerns about interest rates and inflation have been the largest driving force, with over 80% feeling that the increasing interest rates would put a strain on their cashflow – while confidence in the UK economy has also fallen, and there has been a noticeable reduction in the proportion believing that London will remain Europe’s financial capital.

“However, while confidence has fallen markedly, things could be worse.

“Given the unprecedented events of 2022, this drop in confidence is unsurprising.

He continued: “It is also interesting to note that there was only a very modest reduction (3%) in the measure that captures individuals’ confidence about their own finances.

“This suggests that many HNWIs may have processed the challenges that are approaching, perhaps seeking advice, and taking mitigating steps with their investment and financial planning strategies.”