While our research showed that confidence to act was highest based on information that was fully personalised, it also showed that there is appetite for semi-personalised guidance, and this is where we believe the immediate opportunity is.
If we are to break down these barriers and respond to this demand, we need greater collaboration between industry, government and regulators.
Recommendations for regulatory change
To overcome those barriers, financial providers need to be able to provide targeted support and suggest actions or products that address the investment gap. If this does not happen, consumers will continue to keep their money in what they perceive to be the easier to navigate and safer haven of cash.
There are also growing numbers turning to social media in search of more relatable information, potentially exposing themselves to unreliable and unregulated financial advice.
To help address choice paralysis, we believe the government and the FCA should consider altering the regulatory framework for the provision of financial guidance, enabling regulated private sector firms to suggest investment actions to customers with suitable cash balances based on 'people like you' personas.
Our research showed that savers are broadly comfortable with the idea of 'people like you' recommendations, and that they already seek guidance from the people close to them who have already started investing.
These recommendations could include risk tolerance, the amount available to invest, the investment time horizon, the level of investment knowledge and potentially life stage. This makes the decision far more relatable and would help give consumers the confidence they need to step from saving to investing.
To aid comparison of like-for-like products, the FCA could develop a ‘badge’ for one or more entry-level investment product types. Firms could use this if their offering meets a specific set of diversification and asset allocation criteria suitable for less experienced investors. Private sector providers with products that meet the criteria can use this badge and be considered, side-by-side, in the same comparison tables.
Our research suggests consumers would welcome a way to easily identify products that meet their risk tolerance and their level of knowledge about investing, narrowing and simplifying their decision.
Unlocking growth for savers and the economy
Taken together, we believe that these policy recommendations have the potential to improve the market for investment products in the UK in a way that would enable more savers to feel empowered to engage with investing.
By putting investment decisions more firmly within the scope of the provision of public financial guidance, we see the potential for individual savers to feel more supported to achieve their goals.
The advice guidance boundary review is a really positive sign of acknowledgment that more must be done, but it needs to be matched with actions and reforms to truly make a difference to would-be investors.
