With thousands of investment products available, delving into the world of funds, stocks and shares can feel overwhelming for first-time investors. But, for many savers, the right investment strategy could help their money work harder. Sasha Wiggins, Chief Executive of Barclays Private Bank and Wealth Management, explains what the Bank’s latest policy report reveals about the UK’s investment gap. She discusses the barriers to entry-level investing, and why the bank is making five policy recommendations to close this gap and get more people investing for their future.
As a bank, it’s Barclays’ role to help customers make the most of their money and find the financial products that suit their needs and circumstances. Our latest report shows that savers often hesitate when it comes to investing – in fact, there are 13 million people holding £430 billion of “possible investments”: cash savings which could be suitable for investment. These figures are a conservative estimate – based on savers who already have more than six months’ income in cash savings – and reveal the scale of the opportunity if more people in the UK are empowered to invest.
We believe that investing could represent a real opportunity for the right customers to make better returns on their savings. At a time when people are increasingly keen to make sure their money is working hard for them, many are missing out on potential investment returns that could help them achieve long-term goals. Furthermore, if unlocked, it could improve the vibrancy of capital markets, stimulating growth and job opportunities by enabling companies to fund their businesses. That means there is a significant dual advantage to addressing this challenge, both for consumers and the UK economy.
“An investment journey does not have to be a rollercoaster of highs and lows. Investments can be there for the long term to support steady financial goals”
Sasha Wiggins
Chief Executive of Private Bank and Wealth Management, Barclays
What prevents savers from stepping into investing?
Investing can seem hugely complex and difficult to understand. The level of uncertainty around fluctuating markets can mean people end up overestimating the potential risk that is involved, and assume that it means they could lose all, not just some, of their money. Better guidance is required to simplify the investment process to new investors.
An investment journey does not have to be a rollercoaster of highs and lows. Investments can be there for the long term to support achieving financial goals. We believe we need to bring investing to life to help people understand the potential benefits, make it feel more tangible and ensure it is easier to guide consumers to options that may suit them. Investing may not be for everyone – but unless it becomes easier for ordinary savers to educate themselves about options and start an entry-level investment journey, many will miss out on the potential benefits.
So how can we confront the issue and make investing more accessible?
According to our new research, one in five (21%) non-investors with six months’ income in cash savings think they do not have enough knowledge to invest, while one-quarter (24%) think investing is too complicated. Risk is also a deciding factor – more than four in 10 (43%) are worried that they will lose their money after making an investment.
Given the overwhelming number of investment products on offer, it is no surprise that choice anxiety prevents savers from making that first move. Nearly three-quarters (74%) of non-investors want help with comparing options, but the way the market currently operates inhibits them.
Why the approach to investing needs a step change
If we are to remove these barriers for savers, the industry needs to work in partnership with government and regulators to both identify, and then take steps to help empower people to engage with investing – helping them to better understand the options that are available to them.
Key to this is improved consumer support and regulatory change. Today’s regulatory environment means that banks are limited in how they can help consumers start investing without crossing the boundary between guidance and advice. We believe that firms need to be able to provide targeted support and suggest actions or products on a ‘people like you’ basis.
The approach to investing needs a step change – it is an economic imperative. This is why ahead of the Government and Financial Conduct Authority’s (FCA) Advice Guidance Boundary Review being finalised, we have released a new report, ‘Empowering retail savers to engage with investing (PDF 6.5MB)’ , setting out five public policy changes needed to get more UK savers investing for their future.
Empowering retail savers to engage with investing
To help unlock the economic growth opportunity for the benefit of the UK’s capital markets and consumers, Barclays has launched a series of public policy recommendations. Read the full policy paper ‘Empowering retail savers to engage with investing: the role of public policy’.
Barclays’ policy recommendations
We have set our five public policy recommendations for the Government and the FCA to help empower UK consumers to invest with confidence and boost UK capital markets.
Recommendation 1 – FCA badge to identify entry-level investment products that meet specific diversification/asset allocation criteria: To support new investors in identifying products that may suit their financial objectives, the FCA should develop a ‘badge’ for one or more entry-level investment product types that firms could use if their offering meets a specific set of diversification and asset allocation criteria suitable for that intended market of less experienced investors.
Recommendation 2 – Simpler sign-up journey for entry-level investments: To make investing in one of these ‘badged’ products easier, the FCA should ensure a simpler sign-up journey for these products to reduce some of the current frictions in terms of declarations, risk warnings and product documentation for entry-level investors.
Recommendation 3 – Regulatory changes to enable firms to suggest investment actions to customers with large cash balances, based on “people like you” personas: Government and FCA should alter the regulatory framework for the provision of financial guidance. Regulated private sector firms should be able to suggest investment actions or products to any of their own customers who are identified as holding significantly more cash than would be expected for an emergency fund. This new regulatory framework should explicitly permit consumer-facing guidance based on generic personas such as “people like you would benefit from X”.
Recommendation 4 – Online tool and investment guidance from MaPS: The Money and Pensions Service (MaPS) should place a renewed focus on providing public-facing generic investment guidance through its MoneyHelper brand, to include an online tool that guides individuals to the broad set of financial investment products which they may wish to consider.
Recommendation 5 – The development of comparison tables for entry-level investment products: Government should adopt an explicit policy aim to monitor and spur the development of easily accessible comparison tables for entry-level ‘badged’ financial investment products, so that consumers can make side-to-side comparisons through best-buy tables.
Barclays’ policy recommendations
About the author
Barclays’ Group Policy Development team creates public policy thought leadership content on behalf of Barclays. Our work draws on the bank’s expertise, data and insights, and is intended to inform the design and application of public policy solutions in response to pressing economic and societal challenges.
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