Fix consumer attitudes to boost stock market participation, say industry experts
Consumer anxiety over how to invest is the single-biggest barrier to getting more people to enter the stock market, fresh research has found.
Targeted support was found most effective when focusing on consumer’s perceived attitudes of investing and the stock market, ultimately increasing investment by at least 30 per cent, according to new findings from The Investing and Saving Alliance (TISA).
The research, also conducted with the University of Nottingham, uncovered that aversion to risk, expectations of low returns and a preference for keeping money in the UK were deterring Brits from investing.
When support provided recommendations designed around these attitudes it was materially more effective than expected questions surrounding age, gender, income or other social demographics.
The targeted support scheme went live on 6 April, and allows firms to provide tailored financial suggestions to groups with shared needs, in a bid to bridge the advice gap and free firms from the fear of going beyond what is regulated and being penalised.
First time investors and women
Pivoting advice towards attitudes was also found key to attracting groups who have long been found to be the least likely to invest.
Women increased their investment allocations by 31 per cent, compared to their male counterparts who upped their allocations by 14 per cent, emphasising the support’s ability to break structural barriers which were holding women back.
The support also increased engagement among first time investors and cash savers, in line with the industry, regulator and government’s overall aim to turn people away from the safety of cash.
Roughly 15m UK adults have cash savings exceeding £10,000 which they are unwilling to invest, while 13.4m have solely a cash ISA, according to Barclays.
But targeted support saw 53 per cent of savers place money into investment allocations, leading TISA to believe targeted support could be an “effective tool” towards increasing overall investment.
Thee questions were also found to have an impact on existing investors, with 14 per cent boosting their investments, showing that targeted support can also be helpful for investors who are unable or unwilling to pay for financial advice.
Speaking at TISA’s financial advice and guidance conference, Camilla Jessel, managing associate at Simmons & Simmons said: “I think those with similar needs will start to ask questions.
“Do they need to pay such a lot of money for this?”
Consumers were also found to be more willing to discuss their preference on risk and loss, removing the barrier of reluctance that industry figures usually find when discussing incomes with consumers.
Closing the gap
Sophie Legrand-Green, head of policy, consumer protection and access at TISA, said: “As firms begin to deliver it, understanding what makes Targeted Support truly effective is an important next step to improving the nation’s financial wellbeing.
“Focusing on attitudes towards investing, rather than broad demographic assumptions, can give people the extra confidence boost to help them become investors.”
While targeted support allows firms to combat the rising use of AI among retail investors, which provides unregulated advice, industry figures have urged firms to be careful with the advice they provide, calling it a “grey area”.
Firms must find the balance between not giving out generic advice or crossing the line into personal investment advice or risk violating the guardrails and terms of the regime.
But industry figures are hopeful targeted support will shrink the advice gap and become a fixture in the main retail market, moving investors and savers away from speculative assets and unregulated online advice.