Regulation  

Tisa calls for urgent review of advice-guidance boundary

Tisa calls for urgent review of advice-guidance boundary
 

The Investing and Saving Alliance (Tisa) has called on the government to urgently review the legislative framework around firms’ permissions to deliver financial guidance to consumers. 

In a report, titled The keys to unlocking greater investment in stocks and shares Isa, it found that while information exists around stocks and shares Isas and the savings options that consumers have, over 70 per cent do not even consider savings in an Isa. 

One of the key reasons was that people thought the product was not for ‘people like me’. 

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Tisa said prompting more people to consider these Isas could result in several benefits, such as facilitating levelling up across disadvantaged areas, reducing the gender gap and facilitating social mobility. 

Among people who considered investing in stocks and shares Isas, perceived riskiness is the strongest barrier to investing. 

People who have not invested in an Isa perceive the chance of making a loss over a 10-year period in equity markets to be over 30 per cent, whereas the historic probability of realising a loss from investing in the FTSE 100 over a 10 year period is 3.5 per cent, it explained.  

The research found over a quarter of people with at least £5,000 in a bank account intend to withdraw their savings after five or more years, with a significant portion of savers also saying they were planning on holding their savings for 10 or more years. 

These customers could make a higher return investing in stocks and shares Isas, and possibly do not realise that their inflation means their current method of investment may be depreciating in real terms. 

“Firms ought to be enabled to deliver personalised guidance that: explains the risks of holding too much cash; encourages affected people to act; and helps those people choose an appropriate investment,” Tisa said in the report. 

Given that low engagement is the major problem, it urged the government to review the legislative framework around the prompts, nudges, alerts, and suggestions that firms are currently not allowed to deliver to unadvised people as financial guidance. 

Prakash Chandramohan, strategic policy director at Tisa, said: “Consumers need personalised guidance and tools that make information about investments and stocks and shares Isas more accessible and digestible to them. 

“For many people, choosing a stocks and shares Isa wrapper and underlying investments is unchartered territory and they need help to make informed decisions that suit their long-term interests.  

“The lack of engagement in stocks and shares Isas is a clear example that firms need the legislative environment and regulatory tools to communicate with consumers in a savvier manner. “