UK investors turned off by financial jargon and complexity of products
Half of British adults claim they do not invest more of their money because of financial jargon and confusing products, according to a report by peer-to-peer lending platform Crowdstacker.
Crowdstacker believes that a lack of knowledge about how financial investing works could prove to be a huge barrier.
Findings from the national study indicate that a fifth of adults do not know what the term ‘ISA’ stands for and others are further baffled by confusing City jargon.
Four fifths (78 per cent) of adults do not know what a retail bond is; more than half (59 per cent) do not know what the FTSE is; nearly two-thirds (63 per cent) could not define what a dividend is; and nearly three quarters (73 per cent) could not explain what standard terminology ‘AER’ stands for or means.
Lack of knowledge could be worse among the younger generation with one in 10 (10 per cent) 18 to 24 year olds thinking that Roald Dahl’s BFG word ‘Lixivate’ and Joey Essex’s made up ‘confrontate’ are real financial terms.
A quarter (24 per cent) of British adults said they would like to invest an average GBP2,500 of their annual spare cash to try and grow a bigger savings pot. This equates to a potential extra GBP31 billion annual cash injection to the economy.
“Our research reveals the world of investment remains largely closed off to all but a privileged few meaning only a certain section of the population is able to explore and utilise the range of investment options that exist beyond simple cash savings accounts and work pension schemes,” says Karteek Patel (pictured), CEO of Crowdstacker. “The complexity of how the financial world works is difficult to explain and understand, and it’s made worse with the use of jargon and abbreviations. But those of us operating in the Fintech arena have a wonderful opportunity to change this and spearhead new ways to involve more everyday investors by making investment more interesting and much easier to understand.”
The survey revealed that a third of people (32 per cent) prefer to stick to what they know by putting their cash in a savings vehicle such as bank accounts – which currently offer relatively low returns (at low risk) whilst the base interest rate is just 0.5 per cent – and nearly two-fifths (39 per cent) of people make no investments each year.
Crowdstacker is aiming to assist everyday investors in making the right financial decisions based on their personal circumstances in a number of ways, including seeking Plain English approval of investor materials.
“We did this research to find out how confident people are about investing so that we can accommodate this in how we choose and put together investment options. We are also reviewing all our investor materials to ensure they are written clearly and simply so that our investment opportunities are easy to understand for everyone,” explains Karteek. “Our founding principle was to use P2P lending as a way to open up to the everyday investor some of the high quality business investment opportunities that are normally the preserve of the privileged few.
“As one of the few platforms with full FCA authorisation we are already held to the highest standards of clarity and transparency for investors, but we want to go above and beyond this by offering simple and straight forward investment opportunities designed to benefit investors and businesses alike.”