New research published today by TISA and EY Seren reveals a significant ‘confidence gap’ affecting consumers’ ability to make long-term savings and investment decisions.
The research points to women and consumers under the age of 50 being the most dramatically affected. If the industry and the regulator overlook these differences, women and those under 50 are at risk of being left behind. Ensuring that UK adult cohorts can have confidence in making financial decisions is vital in securing an equitable and financial future for UK consumers.
46% of UK consumers surveyed indicated they do not have the confidence to make investment decisions. 19% said the same about making savings decisions.
The top drivers for lack of confidence in making savings and investment decisions were: 1) risk of losing money; 2) finding it too complex and confusing; 3) consumers feeling they had; 4) not knowing enough about the options.
Women are more likely to be overwhelmed by the range of options available. 24% of women gave a lower confidence rating for savings, compared to 14% of men, and 56% of women gave a lower confidence rating for investments compared to 36% of men.
Age is also a key factor, with consumers younger than fifty significantly more likely to agree that they feel “overwhelmed by the range of financial options available” (63% vs. 44% who are 50+) and that “their life is so busy they haven’t had a chance to effectively organise their finances” (47% vs. 19% who are 50+). Millennials (those aged 25-34) are also significantly more likely to feel “embarrassed by their lack of knowledge” (28%) compared to the overall sample, compounding the “under-50 confidence gap”.
Interviews amongst consumers revealed feelings of ‘powerlessness’ and challenges in making financial decisions. Some participants feel unable to improve their financial situation without making changes to aspects of their life not always within reach, for example, raising their salary.
Many feel helpless and fatigued by the overwhelming amount of information and options available after researching savings and investments resources. This led to ‘analysis paralysis’ and inaction, with participants choosing to prioritise shorter-term financial goals, focusing on ‘one thing at a time’. This has an impact on long-term savings and investments, including pensions.
TISA is leading industry efforts, working alongside the FCA, to seek amendments to Advice regulations to allow pension and investment firms to provide consumers more personalised guidance support services to help them choose investment products. Under existing regulations, firms are heavily restricted in the way they can personalise support. It’s this level of personalisation that TISA believes is crucial to ensure all cohorts of the UK’s adult population can be catered for effectively, in supporting them to make their important saving and investment decisions.
Key survey results:
Prakash Chandramohan, TISA Strategy Director said: “A key reason for commissioning this research was to explore the issues being faced by unadvised consumers when accessing support to make savings and investment decisions. The findings were stark, concerning but also not surprising – with significant propositions of consumers feeling worry, overwhelmed, defeated before they start and not even knowing where to start. The provision of consumer is clearly not working for the vast majority of people, particularly those who do not seek financial advice. Furthermore, different cohorts, taking into account age and gender are worse off than others.
“To build greater confidence amongst all consumers, the industry and regulator need to address the concerns identified by respondents in this study. We need to make sure that consumers get the personalised support they need and are given a path through the maze of options that is currently causing confusion.
“To put it simply, the current system of consumer support in financial services needs to evolve, but to achieve this, regulations need to be amended to allow firms more flexibility to provide personalised support to consumers. The UK’s Advice regulations are working for the advised but they are not working for the unadvised, which is causing significant inequities which need to be urgently addressed.”
Stuart Welch, Global Head of Personal Investing and Advisory, Fidelity International said: “TISA’s research highlights just how many people are currently missing opportunities to secure their future financial security, with the greatest barriers facing women and younger generations. Furthermore, the “confidence gap” many face when it comes to long-term financial planning is instead being filled by seemingly ‘easier’ spending opportunities.
“Through our own work, we know that when women see themselves as investors, they are more confident and in control of their financial situation overall. We believe that personalised guidance could play an important part in engaging them, and other groups, as prospective investors – providing the same ease of experience for saving and investing that many have come to expect through spending.”