Monday 6 August 2018, New savings and investment products that are easy to understand and available to everyone are urgently needed, according to a new report by ICAEW.
In Audit Insights: Investment Management, the accountancy and finance body warns that indecipherable statements, high fees and a perception of exclusivity mean many feel alienated from the investment management industry when they need it most. People find investing too complicated, or see it as just something for the wealthy, and this is contributing a savings time-bomb.
'Despite its simple business model, most people find investment management complicated and so they don’t engage with it, and even when they do they can be left feeling frustrated that they don’t have a clear picture of where their current saving or investing levels will leave them in the future' said Philippa Kelly, ICAEW’s Head of Financial Services. 'We need easy-to-understand savings products now more than ever. Increasing life expectancy, decreasing state provision and the decline of things like defined benefit pensions mean many now face an uncertain retirement.'
Offering a series of case studies, the report explains how investment management can be used by everyone to help avert a potential “savings gap” of £25 trillion by 2050. It highlights the need for the investment management industry to offer products that are “valuable, affordable, appropriate and increasingly personalised.”
The paper also points out that this is an opportunity for the industry – and that technology can help. Philippa said: 'People often think investment means wealth management for the well-off. But the investor of tomorrow is everyone. The good news is that digital platforms, robo-advice and artificial intelligence are putting investing within reach for almost everyone. At the moment the cost of individualised services means this kind of investing is just too expensive for many. But exploiting emerging technologies can help change this.
'However, this means we need a change in attitude and approach from the industry. If providers of these services want to seize this opportunity for growth they must commit to providing clarity and boosting customer confidence.'
Philippa said: 'Over half of people between 21-30 make the minimum pension contributions or have no pension at all. The growth of self-employment and the gig economy means that unless something changes this is going to get worse, not better. There is a real opportunity here for the industry to make a difference by doing what it does best. But they need to start now.'
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