The Notebook: Three quarters of Brits don’t invest – it’s time for a confidence boost

Most Brits just aren’t investing – but a little confidence could make all the difference, writes Interactive Investor’s Camilla Esmund in today’s Notebook

It’s all Greek to me

We know that not enough of us in the UK are investing, and yet it has perhaps never been more important to have our money work harder for us. I was looking at some research from Barclays that claimed around 13m UK adults hold £430 billion of “possible investments” in cash savings. 

Empowering savers to become investors is important but by no means always easy – especially with many of our finances feeling the squeeze, and plenty of political and economic uncertainty on the horizon. But it raises an important question – how can we encourage savers that they don’t need to be a Warren Buffett to build the financial futures they deserve?

A big barrier to investing is confidence. We launched our Interactive Investor (ii) Managed ISA earlier this year, and alongside the launch we wanted to explore this in more depth. Our consumer research chimed with that of Barclays’, and in an II survey, we found that three-quarters of Brits don’t invest. 

Unsurprisingly, the main reason cited was lack of knowledge and understanding of investing (22 per cent), and other reasons included concerns about losing money (20 per cent), the fear of market volatility (12 per cent), and low confidence in the ability to pick the right investments (12 per cent). Reasons I’m sure many of us can relate to.

This is why I’m so passionate about jargon-free financial education, but our industry needs to do better. For example, why oh why are we still using Latin in investment documentation designed to be read by a broad range of consumers? (‘Ad Valorem’ – I’m looking at you). And why are so many retail investors still in the dark about the true extent of investment fees/charges, with a vague notion of value for money. We’re very vocal on the need for clear and transparent pricing. After all, if we build an environment where retail investors can engage with knowable and quantifiable charges from the outset, it helps pave the way for making well-informed decisions throughout the lifetime of their investments.

The pre-October Budget jitters 

Despite this lack of consumer confidence, savers and investors are facing lots of important financial decisions. That’s a concerning predicament. 

The hotly anticipated October Budget already has many savers worrying, with plenty of rhetoric about potential tax hikes and other “difficult decisions” that will have implications for our personal finances. The spotlight has firmly been on the pensions landscape, too, and this also hasn’t gone unnoticed by savers.

Last week, we delved into what II customers were doing ahead of any announcements. Its particularly thought-provoking data given that our customers are self-directed, and we saw a marked increase in the number of investors maxing out the annual pension allowance, as well as those withdrawing tax-free cash from SIPP accounts, and making one-off contributions. The pre-Budget jitters are understandable, but it’s also a timely reminder of avoiding speculation when it comes to making decisions about your financial future. After all, pensions are inherently long-term investments. In fact, any investment is a long-term game.

But sitting tight and trusting the long-term performance of your investments, especially amid plenty of political and economic noise, is easier said than done when you lack financial confidence and/or knowledge. 

Quote of the week:

“The winds of change blowing through the financial world mean more of us feel under pressure to make big money decisions — yet many feel ill-equipped to make the right choices.”

Claer Barrett, consumer editor at the Financial Times

Instagram advisors

A poignant quote that really jumped out at me in our most recent Great British Retirement Survey read: “I just wish someone had talked to me about this when I was younger. No-one educated me about personal finances. I educated myself – but only in my 40s. Such a shame.” 

In the absence of a robust financial education framework, many are taking matters into their own hands, and we have seen social media rise to the forefront of this. 

While we have reservations about the quality of guidance that can be found on social media, we can’t negate its influence, and it certainly can be a force for good. The challenge for consumers is applying quality control and there’s no question that investment platforms have a role to play here in producing high quality content across a range of channels – it’s something we take very seriously.

Camilla Esmund is senior manager at Interactive Investor