Terror attacks ‘making investors more cautious’

The terrorist attacks on the United States, coupled with fears of a global recession, have changed the way people are investing their money, research suggested today.

Sharp falls in the stock market following the September attacks have led to investors being more cautious about where they put their money, according to IN-Partnership Group.

The network of independent financial advisers (IFAs) said since the disaster there had been a marked shift away from risky products such as equities into safer ones such as bonds and investment funds with guarantees.

It added that there had also been a rise in people taking out or increasing the value of critical illness and death cover, with many consumers expressing fears that the terrorists may strike in the UK.

Overall 60% of IFAs said their clients were now more worried about their financial future than they had been prior to the attack.

They added that they had been inundated with calls since September 11, with the number of people wanting advice rising again after last week’s plane crash in New York.

Investors were also reported to be pessimistic about the state of the economy, with 58% of IFAs claiming their clients thought a global recession loomed, while 63% said they thought a recession in the UK was now inevitable.

The group is predicting that the uncertainty will continue until the terrorists responsible for the attacks have all been caught.

Kevin McDonagh, chief executive of On-Line Partnership Group, which trades as IN-Partnership Group, said: ‘‘People have been deeply shaken by recent events. All our research shows that the effects of September 11 will be felt for some time.

‘‘Savers are being more prudent in their product selection and thoughtful in their deliberations.’’

He added that since the disaster 30% of the IFAs questioned reported seeing an increase in business, while 94% said they thought customers were now more reliant on advice than they had been before the attacks.