This agency ties in to how consumers engage with making financial decisions more broadly. With third-sector sources and comparison websites widely used today and seen as trustworthy and credible, consumers are familiar with a comparison model and it could be a simple solution to overcoming choice paralysis.
Thirdly, compounding both of these obstacles is the fear of risk, and the results here are telling: of those who do not currently invest, more than four in 10 think investing is too risky and are worried they would lose all their money.
When asked what they understood as investment risk, around two-thirds considered ‘risk of loss’ to mean losing most, if not all, of their invested savings.
Equally, while there was acknowledgement that their savings do not stretch as far now as in the past, cash is still tangible – one of the driving forces that leads people to continue to accumulate cash savings is that they can see the money grow over time, with the flexibility to draw down when needed.
A key misconception that we need to overcome is that money invested is locked in. While we would always encourage investors to sit tight and leave their investments for as long as they can, in most cases you can sell investments at relatively short notice.
How to boost savers’ confidence in investing
We also researched what improvements would actually help savers to start investing.
More than a quarter say they want access to online tools to help them to decide what to invest in.
Based on what we heard from participants in our qualitative research, the most important criteria for comparison seemed to be the potential return versus that from interest paid on cash; the potential return from investment over different time horizons; and the potential return taking account of the impact of inflation.
The research also suggests that illustrative graphs to compare performance over time may be an effective enabler.
Secondly: improved personalisation. One in five said they would feel more confident to invest if they could access more personalised information to inform their thinking.
Thirdly: visualisation of returns. One in seven who do not currently invest said greater visual information on the potential returns available would help them to see the benefits more clearly.
It is more effective to make consumers feel encouraged to act in order to potentially benefit, rather than making them feel like they must act or risk losing out.
Clearly, the aid that will be of most help to an individual saver is going to be entirely dependent on them, how they like to receive information, and how they make decisions. What ties it all together is the provision of bespoke information that cuts through the noise and complexity and allows the first investment steps to be taken.
