Covid-19 pandemic has not significantly changed investor mindsets, says SCM study
Few lessons have been learnt in the decade since the last financial crisis, according to new research by SCM Direct, the investment manager launched by Alan and Gina Miller in June 2009 as a direct response to the institutional failings that contributed to the Global Financial Crisis.
According to the study, which was commissioned to gauge if Covid-19 has affected investment decisions and thinking, the UK investment industry continues to fail in respect of building product awareness and trust, leading to a lack of consumer engagement in looking after their financial health.
The Research conducted by Savanta ComRes between 5–7 June found that in terms of product ownership, only 15 per cent own an Investment ISA and only 8 per cent a SIPP, with men more likely than women to have an Investment ISA (20 per cent Vs 11 per cent), and also more likely than women to have a SIPP (11 per cent Vs 6 per cent).
Of those that do not have an Investment ISA or SIPP, young adults aged 18-34 are more likely than those aged 55+ to say they are not confident in making such financial decisions (25 per cent Vs 14 per cent), or have never heard of them (15 per cent Vs 2 per cent).
Men are more interested than women in both ESG investing (20 per cent vs 15 per cent) and online investment platforms (22 per cent vs 16 per cent) following the pandemic, while young adults aged 18-34 are significantly more interested than older adults aged 55-plus in both ESG investing (28 per cent vs 8 per cent) and online investment platforms (31 per cent vs 7 per cent) following the pandemic.
Gina Miller says: “Whilst these findings are not surprising, it is extremely disappointing that the UK pension and investment industry has not managed to increase product awareness or confidence and trust amongst UK consumers since the last financial crisis. Added together, 33 per cent of UK adults lack confidence to make investment decisions and lack trust in the products. There is also a stubborn female investor gap that the industry must work harder to address.
“We believe that with 100 per cent transparency of fees and holdings, a concerted industry effect to educate and build product awareness, and communicating in a more jargon-free manner that clearly illustrates the value and benefit of pensions and investments, the industry can contribute to the social good.
“As another serious economic downturn looms, as well as potentially negative interest rates, there needs to be an industry commitment to work together to improve both its image and communications so people understand that their financial health depends on them taking active measures to save and invest at a time when demands on the public purse and financial insecurity are likely to increase.”
Alan Miller adds: “In terms of Ethical/ESG investing, our findings suggest these trends were already growing prior to the pandemic. The pandemic has not in itself, significantly changed investor mindsets for Ethical/ESG products. The recent flurry of industry news stories suggesting otherwise, appears to be another example of the industry talking to itself as it attempts to justify charging higher fees for ESG/Ethical investments.
"In terms of low-cost DIY online investment platforms, we believe SCM Direct was the first actively passive ETF digital fund manager in the UK and we are pleased that more innovators have entered the market, but this research suggests there is a need for all of us to collaborate and communicate our benefits to the public and increase market share away from higher cost traditional providers.”