Personalisation may encourage greater saving and investing

The research, called 'A Little More Personalisation', surveyed over 500 adults with more than £10,000 that could be invested and sought the views of those that described themselves as advised investors, do-it-yourself investors and non-investors.

It found more than a fifth (22 per cent) of those who identified as non-investors would be encouraged to invest if they were able to access some form of basic personalisation compared with only 12 per cent who said they would invest using generic guidance as is currently the case.

However, fully tailored personalised advice was identified as the best way to encourage greater saving and investing, with 51 per cent of those identifying as non-investors saying they would be most likely to start investing if this was something they were able to access.

The research further found that 68 per cent of non-investors said they probably, or definitely, would not start investing within the next 12 months. 

The reasons given for not doing so ranged from perceptions of the investment world as intimidating (56 per cent), a lack of exposure to investing within their social circles (77 per cent) and feeling emotionally apprehensive or overwhelmed about investing (54 per cent). 

Simon Harrington, head of public affairs at Pimfa and author of the report, said: “Pimfa has always been strongly committed to fostering a culture of saving and investment within the UK. 

“We sought to commission this report in order to test our own hypothesis that providing non-advised consumers with targeted, personalised guidance to encourage investment decisions would help more people overcome the behavioural barriers which prevent them from investing. 

“In this area, our findings are somewhat disappointing.”

Moreover, the research found that only 46 per cent of non-investors understood the risk of the value of their cash savings being eroded by inflation over time.

Meanwhile, among those that described themselves as investors - whether advised or DIY investors - the reason cited by the majority for them beginning their investment journey was hearing about the investment experiences of others within their social network. 

Hearing about the investment experience of friends and family was cited by 45 per cent of advised investors and 31 per cent of DIY investors as the reason they began investing themselves.

The research found that 77 per cent of advised investors and 70 per cent of DIY investors described their financial status as secure, compared with only 59 per cent of non-investors.

This lack of financial security helped contribute to a lack of confidence among non-investors when it came to managing their investments, with 49 per cent of non-investors saying they believed investing was only for those that already had a large amount of money.

 “It is clear to us that there is an argument to give greater thought to providing people with better targeted support when they need it most to help them achieve a better outcome.” Simon Harrington, Pimfa

Additionally, 53 per cent of non-investors said they would only consider investing if they were to come into a large sum of money or inheritance.

Pimfa said these perceptions are contributing to a cycle of non-investment which will only build inadequacies over time rather than narrow them. 

A pre-existing lack of confidence in making decisions, coupled with an isolation of influence among non-investors, suggests that positive interventions are required to overcome this lack of confidence.

Both advised and non-advised (DIY) investors, and non-investors, saw value in personalisation for longer-term financial planning, with fully personalised options perceived as most likely to encourage some to start investing. 

Those that had already received advice said they valued a fully tailored personal advice model (57 per cent) compared with 42 per cent of non-investors and 32 per cent of DIY investors.

Basic personalisation was the next preferred option of 40 per cent of advised investors, 34 per cent of non-investors and 56 per cent of DIY investors.

The report concludes that non-investors require targeted advice to gain confidence to act in order to make initial investment decisions. 

However, Harrington said the introduction of basic personalisation for non-investors would have some, but not a substantial impact on consumer behaviour relative to the status quo where no personalisation exists. 

“This means encouraging people to make active decisions about their finances requires a radical change in consumer behaviour,” he said. 

“We are more positive about the impact increased personalisation could have with investors who are already somewhat engaged in making investment decisions as DIY investors as well as those who will be forced to engage when they come to decumulate as pension savers. 

“It is clear to us that there is an argument to give greater thought to providing people with better targeted support when they need it most to help them achieve a better outcome.”

The research suggests that whilst the introduction of added personalisation would likely be welcome, its impact to encourage greater saving and investment will be limited.

Yet Harrington argued that these are changes which cannot be made within the current regulatory and legislative framework.

sonia.rach@ft.com

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