Confidence returns as advisers back shares

Confidence in equity investments has dramatically revived in the past three months with 79% of IFAs advising clients to invest in UK shares over the next three months compared with just 57% in February when the FTSE-100 was heading down, according to the latest results from the Virgin Money Investor Intentions Index.

However it is not just UK shares that have benefited - advisers are now more likely to recommend equities across the board with increased confidence in European Shares, Emerging Markets and Far East Shares.

Confidence in investing in Commodity Funds, Gold and Property Funds has also increased dramatically in the past three months.

The renewed appetite for risk is reflected in a drop in intentions to invest in cash and bonds - 59% of IFAs will advise investors to put money into cash over the next three months compared with 67% in February with 79% advising Bond funds compared with 83% in February, the index shows.

Far East Shares recorded one of the biggest increases to 68% intending to advise clients to invest over the next three months compared with just 46% in February with Emerging Markets seeing a surge from 46% to 75% in the quarter.

And in Virgin Money's Investor Intentions Optimism League UK shares are now at the top with Emerging Markets and Bonds in second and third place.

The company's authoritative Investor Intentions Index tracks the confidence of independent financial advisers across the country in 10 different investment sectors as well as where they advised their clients to invest their money over the preceding quarter.

Compared to this time last year, when investors saw cash investments as the only way to safeguard capital while stock market volatility was so high, IFA confidence in cash has fallen heavily. In the first quarter of 2008, 86 per cent of IFAs were advising clients to put their money in cash, while just 59 per cent will do so now.

Virgin Money believes the sea change is due to the prospect of green shoots in other markets compounded by the poor rate of return on cash while interest rates remain low. The Bank of England reduced the base rate of interest to a historic low of 0.5 per cent in March 2009 and has yet to change this position.

Virgin Money spokesman Grant Bather said: "Better returns now outweigh the relative security of cash investments. IFAs quite rightly sought the safety of cash and bonds when banks were desperate to improve liquidity and equities were so unpredictable.

"But in the past three months confidence is starting to return and while there's a long way to go these are promising signs."