New research suggests a split on the direction of stock markets, with advisers far more bullish than clients.

Some 77% of advisers surveyed recently expect equities to rise over 12 months.

In contrast, only 53% of advised clients and 43% of non-advised consumers surveyed expect equities to rise over the next 12 months.

While many clients are reluctant to invest in equities, some 34% of advised clients surveyed by Scottish Widows think ‘taking too little risk’ has been their biggest mistake over the last 12 months.

The Scottish Widows Investor Confidence Barometer suggests a “sizeable gap” is developing between advisers and general investors in terms of stock market confidence.

The gap remains high on a five-year view too with 84% of surveyed advisers believing that equities will rise versus 66% of surveyed advised clients and 61% of surveyed non-advised investors.

Scottish Widows says that based on its historical data, investor confidence has barely recovered from the 2022 market correction, despite global markets recording a relatively strong recovery since markets bottomed in October 2022.

Persistently high interest rates, rising mortgage rates, food and energy prices have conspired to fuel investor uncertainty, with significant pressure on household incomes at the same time, says Scottish Widows.

Investors’ expectations about inflation have worsened. Of those surveyed, 62% of advised and 63% of non-advised investors believe inflation will remain an ongoing feature for the next few years. This is a marked increase from the last barometer in May 2023 when 47% of advised and 48% of non-advised investors believed inflation will remain an ongoing feature for the next two to three years.

The provider said there was evidence to suggest investor pessimism has been damaging to returns, with 28% of surveyed advised clients reporting that they initiated an increase in cash holdings with their adviser.

Despite this, when asked about what mistakes they had made over the last 12 months, 34% of surveyed advised clients admitted it was "taking too little risk."

Taking too little risk was also the second most common mistake cited by surveyed non-advised investors (28%, up from 25% previously).

Amid the uncertainty, a 72% majority of surveyed advised clients said that they had contacted their adviser to discuss market volatility in the last 12 months, a jump from the 61% recorded by the last barometer.

Barry MacLennan, chief executive officer of Scottish Widows’ Embark Investments platform, said: “It’s understandable investor confidence has taken a knock given the current economic and geopolitical uncertainties. However, stock markets typically look through the gloom, so it can be damaging in the long run to take portfolio risk off the table due to short-term, negative news.

“With investors admitting that ‘taking too little risk’ has been one of their biggest mistakes, a key part of the adviser role is to keep their clients on track from a risk-reward perspective, by focusing on long-term outcomes.”

• The Scottish Widows Investor Confidence Barometer is a twice-yearly survey of over 1500 people conducted by Censuswide for Scottish Widows Platform. It surveyed the following groups between 8  and 18 September 2023: 502 advised consumers (those that have a financial adviser) with a minimum of £100k investible assets, who have a pension and are aged 35-70; 500 non-advised consumers (those that do not have a financial adviser), with a minimum of £100k investible assets, who have a pension and are aged 35-70; 502 (18+) financial advisers who have clients, whose company/firm has assets of less than £500 million.