With thousands of investment products available, delving into the world of funds, stocks and shares can feel overwhelming for many first-time investors. But, for many savers, the right investment strategy could help their money work harder.
The result of this uncertainty is a significant investment gap, both for individuals and for the UK as a whole. Changing that could bring big benefits.
Our latest report at Barclays shows savers are indeed hesitating when it comes to investing. In fact, there are 13mn people holding £430bn of “possible investments” – cash savings that could be suitable for investment.
These figures are potentially conservative – based on savers who already hold more than six months’ income as cash savings – but they reveal the scale of the opportunity ahead.
If we can close the investment gap, we will address two major untapped opportunities for the UK.
First, at a time when people are 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.
Second, if more of the £430bn is unlocked, it could improve the vibrancy of capital markets, stimulating growth and job opportunities by enabling companies to fund their businesses.
Ahead of the outcome of the government and Financial Conduct Authority's advice guidance boundary review, Barclays has published a report that sets out key public policy recommendations we believe will help address this investment gap.
Overall, our focus is on how to improve the regulatory framework and how we can make it easier for new investors to identify and compare suitable investment products.
The key barriers to retail investment
We conducted detailed quantitative consumer research with more than 2,000 UK adults, alongside qualitative discussions with savers holding cash savings in excess of six months’ income, to uncover people’s reservations about investing.
Firstly, there is clear choice paralysis, with consumers finding it difficult to identify the type of financial investment product that may suit their financial objectives. One in five of those who do not currently invest think they have insufficient knowledge to do so, while a quarter think investing is too complicated.
This is the first big hurdle: if we want to truly empower savers to invest, we need to arm them with the information they need to make decisions that align to their financial goals.
Secondly, the inability to make simple, side-by-side comparisons of specific products within an investment type; nearly three-quarters would like to know what type of investment is best for them, while two-thirds of UK adults (63 per cent) want help comparing investment products.
A theme that emerged in our qualitative research was that it was important for consumers to be able to retain agency over the decision of whether to invest, and what to invest in. There was the view that if they are the one making the decision, they are accountable.
