Like rabbits caught in the headlights

‘It’s a difficult world out there,’ admits Chris Kenny, investment director at Smith & Williamson, the wealth management and accountancy group. ‘There’s the recession, the economy teetering between inflation and deflation, higher tax rates, increased risk and lower returns all round.’

While market risks have soared, investors’ faith in the people charged with looking after their money has plummeted. ‘Private clients’ trust in investment managers has pretty much collapsed,’ says Kenny. ‘I don’t think many people in our industry have been good enough at apologising and saying “mea culpa” when things have gone wrong.’

So what exactly has been going on in wealthy investors’ minds while the financial world has tumbled around them? Between March and May this year, Barclays Wealth surveyed 2,100 high-net-worth individuals around the world to find out. On the positive side, 88 per cent said that they saw significant investment opportunities in the current environment. On the negative side, 68 per cent of these also said they were steering clear of the opportunities because they believed that the risk of further price falls was too high. Only a minority — 28 per cent — plan to increase risk levels in their portfolios during the next year.

In short, affluent investors have been frightened into inaction. Indeed, more than half of those surveyed by Barclays Wealth said they would not be adjusting their major asset-class allocations at all during the next 12 months. Those who do plan to tweak their portfolios intend to retreat to simple, familiar assets such as real estate, government bonds and commodities.

There’s good reason why wealthy investors’ nerves have been jangled by the financial crisis: it’s their own life’s work at stake. ‘Most high-net-worth individuals take the view that they’ve taken risk in their personal and professional life — and that’s what has generated their wealth.