Britons are great savers – that's the problem

Telegraph

10 hours ago

The British aren't bad savers. But – as a nation – we hold much less of our wealth in investments than our American and European counterparts – limiting potential for long-term returns.
The Government recognises this issue and is considering savings limits to cash ISAs, which could encourage investment in shares and other assets, but what about the root causes preventing appetite for investing?
Robinhood, alongside Global Counsel, examined the barriers to investing for under-represented groups in the UK. Inclusion is foundational to Robinhood's mission: of our 25 million customers, around half are first-time investors. We're working to match that level of access in the UK – and that starts with listening.
Research showed that people approach investing differently, with distinct barriers to investing for women and ethnic minorities.
Women are significantly less likely to invest than men, and ethnic minorities invest considerably less than the majority population. When they do, motivations vary, and lack of confidence undermines actual capability.
Ethnic minority investors are nearly four times more likely to invest to support elder family members, which may explain why they tend to be more focused on medium-term gains over longer-term, personal retirement goals. They are also twice as likely to hold exchange traded funds (ETFs).
Confidence in social media is low for all respondents, yet 44pc of ethnic minority respondents are likely to rely on it for investment advice, versus 14pc for non-ethnic minority population.
There is also widespread misunderstanding of the minimum amount of capital required to invest. For relatively accessible investments, like stocks and shares Isas, respondents believed they needed, on average, £2,383 to invest – more than 23 times the £100 minimum required by many providers.
Policymakers and industry can address the barriers.
The Financial Conduct Authority is clear that the consumer duty welcomes innovation, provided that it leads to better consumer outcomes.
Historical, well-intentioned regulation has created a market where financial advice is out of reach for many. However, Advice Guidance Boundary review, and more specifically Targeted Support, can now address this by allowing firms to provide advice on the basis of 'people like you', opening financial advice to a wider range of investors.
With this in mind, firms should be allowed to re-visit the way investment risk is represented – to help, rather than alienate, investors.
Cash products are not required to carry warnings about lower long-term returns or the risk of wealth erosion due to inflation, while investing products must carry multiple downside warnings. Both should carry equally robust and proportionate information – so consumers understand the risks of investing and the risks of holding cash.
Additionally, marketing materials should dispel myths about up-front capital requirements for investing. The move to a new Consumer Composite Investments regime should broaden the range of products retail consumers can invest in, including specifying US-domiciled ETFs in the overseas fund regime.
The data is clear. UK consumers want to invest more, and in a wider range of assets. This requires coordinated action. But the opportunity to create a nation of long-term investors is too important to miss.