UK consumers could benefit from moving excess savings to investing. But our latest research reveals that we are, as a nation, suffering from decision paralysis.

By our calculations, there are approximately 13 million UK adults who have at least six months of income in cash deposits. Collectively, they hold an estimated £430 billion of “possible investments” – additional cash savings which could be suitable for investment.

It is clear why so many of them are reluctant to start investing.

First, they must decide whether investing is right for them, and once they have done that, set their sights on an investment goal. Then, they must choose an investment provider, determine how much they are willing and able to invest (and how often), the level of risk they are comfortable with, and which mix of investments will provide them with a diversified portfolio.

It can feel overwhelming – like stepping into another world – and many would rather stick with the status quo of retaining the cash on deposit.

That feeling is totally understandable, but it is not cost-free. The longer they wait to get started, the less time their money is invested in the market to compound and grow, and the longer it is likely to take them to reach their investment goals.

It is also not cost-free for the UK economy. That £430 billion has the potential to improve the vibrancy of UK capital markets, enabling companies to fund their businesses, stimulating growth and job opportunities.

To determine how best to address investment decision paralysis, we surveyed 2,000 UK investors to understand what persuaded them to invest for the first time, as well as any challenges they felt they had to overcome. The findings make for interesting reading.

We asked investors to rank the hardest decisions someone might make over the course of their life, and 38% placed the decision to invest money in the top three. Only the decision to buy a house came higher, and, even then, only by a small margin of 4%.

Looking at why, there were two key factors at play. The first is expertise, with 44% of investors revealing that a lack of knowledge held them back, while 41% put it down to a fear of losing money.

Looking at the averages, the investors we surveyed took just over three and a half months from first consideration to final decision, and at the top end, almost one in 10 (8%) – the equivalent of roughly 1.5 million UK investors – said it took over a year.  When you take compound interest into account, the long-term impact of those 12 months really starts to add up. 

We also asked investors how old they were when they made their first investment, as well as what spurred them to take action, and the results demonstrated that there is no ‘average’ path.

Starting ages were spread very evenly, with three in four investors beginning anywhere between the ages of 20 and 50. Meanwhile, the most common catalysts for getting started were influence from friends and family (26%), followed by wanting to achieve a specific investment goal (23%) and guidance through financial advice (23%).

Interestingly, one in five (20%) said they began after receiving a lump sum of money, such as an inheritance or a divorce settlement. Figures as high as this suggest that a great many would-be investors decide to begin investing in challenging and emotional circumstances. It is in times like these that they deserve the right level of support to feel confident in their investment decisions.

To support new investors in identifying products that may suit their financial objectives, in our report "Empowering retail savers to engage with investing: the role of public policy", we recommended that the FCA consider develop a ‘badge’ for one or more entry-level investment product types. This would help narrow the set of choices that those starting to invest face. Together with the proposals in the Advice Guidance Boundary Review to allow firms to offer more personalised financial guidance, firms will be able to do more to support would-be investors as they take their first steps.

Choosing to invest should not be considered more difficult than life-altering decisions such as buying a house, and we are determined to make the decision simpler and more accessible. I believe that our policy recommendations would achieve that, to the benefit of millions of UK savers, and the UK economy.