Podcast  

How Covid-19 is helping to democratise investing

 

Covid-19 has provided opportunities for financial technology to open up investing to a wider range of investors, a panel of experts have suggested.

While investing apps and websites have existed for many years, too often retail investors have been left out of share issuance, while younger and less affluent potential investors may have been put off by complicated jargon and voluminous prospectuses.

However, according to experts on FTAdviser's latest podcast, lockdown has accelerated change, with more people than ever using the extra time to start getting to grips with their finances, and using financial technology to help make the process of investing more democratic. 

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Talking to Financial Adviser editor Simoney Kyriakou on the Democratising Investment podcast, Anand Sambasivan, chief executive of PrimaryBid, said it was important to acknowledge that, historically, young people had been hindered in the past from getting involved in investing.

"We want to help retail investors participate in the new share issuance that listed companies do. Historically, any company needs to raise money, and even more so in this environment when valuations are low and companies have to rebalance their balance sheets.

"The UK has seen 68 deals done in the past few weeks and the investors lucky enough to take part are the institutional investors.

"Retail investors are not able to participate in these accelerated offerings, because they are too fragmented, deals are too time-sensitive and there is all this administrative burden, so retail investors remain excluded even though the technology exists today to include them."

But more retail investors are becoming interested in investing and are using their lockdown time and the technology available to get involved, so the old ways are about to change, according to Michael Kent, from digital money transfer firm Azimo.

He said: "The promise of fintech is a reduction in the cost to serve. Historically, people with access to market opportunities and good education were those who had a high net-worth but if you have £100 a month to spend it has been hard to put that into the market to get the same level of opportunities.

"So the wealth tech sector has an opportunity to reduce the cost of giving good investment service to more people, and younger people are used to organising their finances on apps, so this could be a way forward."

Earlier in June, data from Experian found that since the start of the Coronavirus pandemic six in 10 Brits reported having increased financial awareness, 35 per cent had increased their knowledge of financial matters and 30 per cent had actively researched financial advice and guidance to help support themselves during this time.

As financial education and fintech improves, even more retail investors will be able to participate in share issuance and feel more confident making investment decisions.

Ruth Wandhofer, a partner at Gauss Ventures, told FTAdviser: "A key barrier is education, which is being built into the school curriculum. And there are apps out in the market trying to educate younger people much earlier in life about the importance of investing, and giving them different options - almost in a gamified way.