When The Wisdom Council launched our Yes She Can campaign in 2018 to unpick the gender investing gap, an FCA team member looked aghast at the idea that we might be encouraging women to take more ‘risk’ with their savings. Investing was seen as somehow beyond the risk appetite of many customers, especially women. We found it frustrating that the focus always seemed to be on highlighting downside risks. How far we’ve come from that debate…
We broadly welcome the announcements made by the Treasury around the Mansion House speech on 15 July, including what we now think of as the Leeds reforms. According to Chancellor Rachel Reeves, the government aim is that “Working people will be equipped with the support they need to invest and grow their savings, under plans to rewire the financial system to attract investment, create good skilled jobs across the country and put more money into people’s pockets.” The underlying objective is to create a flow of much-needed capital into UK companies and infrastructure projects from retail investors. The hope is that policy and regulatory change will be enough of a nudge to turn savers into investors. For TWC, this is a multi-faceted issue that will need a fundamental shift in the savings culture in the UK.
We know from our own work that many savers are unfamiliar with the language of investing and have deep-seated preconceptions about how investors look and behave. It will take time and persistence to change this perception, but there are approaches that can help.
We are constantly looking for the ‘why’ behind human behaviour and trying to unearth the most effective ways to move the dial. We have found that:
🔸 What puts many customers off investing is the idea that they will lose all of their money (not helped by current risk disclosures!). When customers have a clearer understanding of the risk/reward dynamic, they are more likely to take more risk with their savings (even if just a bit more)
🔸 When savers realise they are already ‘investing’ through their workplace pension scheme, they are more comfortable with investing beyond this and more likely to increase pension contributions
🔸 Women are NOT the cautious investors much of the industry would have us believe – with encouragement they are just as engaged as men and are willing to take (measured) risk
🔸For many younger investors, things like high risk crypto or meme stocks have framed their attitude to investing. The industry needs to adapt the way they talk to these audiences if they want to engage them for the long run.
So a measured discussion about the potential benefits of longer-term investing and taking calculated risks is welcome. Coupled with a long overdue review of regulatory risk warnings and changes to the advice guidance boundary that should allow firms to support customers more effectively, this could be the start of a significant shift in thinking.
But it is just the start.
What we would like to see:
🔹 Financial education hand in hand with encouragement to invest (and a long-term commitment to delivering financial education in schools)
🔹 Support that is appropriately targeted and clearly communicated, taking into account customers’ attitudes, behaviours and current progress along any savings journey
🔹 Campaigns that don’t entrench existing biases, don’t obscure messages with jargon and that have multi-generational appeal
🔹 Striking a balance between innovation and risk-taking, while maintaining relevant consumer protections – hopefully in a new Consumer Duty world this goes without saying
🔹 An industry that genuinely knows its customers and accepts that it will take time to build trust with them – by being open and authentic, and not patronising customers
For these initiatives to lead to a fundamental shift in the over-save/under-invest culture we need to see fresh thinking, clear representation from the customer in how the industry evolves and an acceptance that there is no quick fix.
We’re up for the challenge if you are! 👊