Savings/Investment Gap – where are we today?
The investment and savings gap remains a problem…. but it shouldn’t be as difficult as a Rubik cube!
The Retail Distribution Review (RDR) was actioned in order to narrow the gap, building confidence and transparency in the financial Services sector. Encouraging lower to middle earning families to become more financially secure, accessing professional advice.
Saving and investing should be simplified – not increasingly complex – in our view ….
In many ways, the RDR produced great outcomes:
- A minimum level of Qualification and Education, along with an ongoing training requirement, leading to increased professional standards for authorised and regulated advisers and businesses.
- Adviser charging transparency – no commission bias – (although I personally didn’t see there was a bias) providing clarity of advice terms, costs and services.
These focus points for the benefit of customers were supposed to improve confidence in the financial services sector … which one could argue it has… but how has the savings/investment gap narrowed – and how have products become simpler to understand?
An article in an “Adviser – Points of View” on Tuesday writes about ‘UK Savers must set aside a quarter of earnings for a good retirement’ – click the link to read the article in full:
The call is for Government to make policy reform in order to narrow the “GAP”.
During the period of regulatory change, global central banks used extreme monetary and fiscal policy in order to bring the banking world “off its knees” – encouraging economic recovery (for those who invested at the low point of the Global Financial Crisis (GFC) the returns have been strong (double digit returns) – for those held in cash the results have been less so!)
Financial Risk versus Reward
Our industry experience certainly confirms that no two people are the same in relation to their needs (both in relation to service and circumstances) so we have developed a service proposition to suit all.
Some customers want a ‘hands on – living and breathing’ service; some want to self select products where the service is purely transactional.
We fully recognise that we need to cater for both financial appetites although we clearly feel that a ‘risk evaluation’ and planning overview is beneficial – so DIY investors can remain on track.
The starting point of consideration when investing is the capacity for an investor to suffer capital loss … So, for the main percentage of Society (mass market) here in lays the problem …. How does an investor evaluate capacity to suffer capital loss when investing?
Saving in cash – although essential as a contingency fund/pot, has not produced anything like ‘attractive’ results, but for the many the risk associated with investment markets for a medium-term period had created financial damage; during the Global Financial Crisis, scaring the investor who could least afford the capital falls in value.
We regularly find, when speaking to DIY investors, that they simply do not truly understand the risk inherent in the investments they have made when DIY investing. We write a large amount of regular communication to our clients and consumers in order to support their understanding of various product offerings endeavouring to assist with their knowledge and stimulate ‘thinking’ and ideas in relation to how products may fit their needs if they continue on the DIY road. Gathering a snapshot ‘Risk evaluation’ from a professional adviser is worth its weight in gold, in our view, and money well spent – if this service is purchased without a product solution. Think of a review and risk balance recommendation as pure consultancy – without the sales …..
A simple cashflow plan can help with staying on track with the longer term investment objectives, combining an investor’s risk objectives with investment needs.
Structured Deposit Plans
Capital safe – potential for ‘Risk Like’ returns.
So, what could help to ‘fill the investment gap’?
It is clear that the evolution of a number of product areas has attracted money from society (the wide population) generally, such as peer to peer lending, crowd bonds and higher risk assets, driving some savers/investors into higher risk product areas in the search for higher returns, often putting capital at risk, in a misunderstood way!
A number of banks are currently promoting ‘Pay day, save day’ which is great.
According to Nationwide, it is estimated that 11.6 million adults across the UK have £100 or less in savings and half of twenty somethings have no savings at all!
Pay day, save day is therefore essential for building an emergency fund. Parents and grand parents can help by speaking with children/grandchildren, encouraging good financial habits. Take a look at a previous article written about Good Habits – https://www.bestpricefs.co.uk/blog/financial-advice-producing-quality-consumer-outcomes/
So where could an investor search for real long-term value once the issue of a contingency pot is accumulated? Society generally needs to focus on an increased approach to zero tolerance to waste and excess, be it to do with consumption or items that are environmentally damaging…. Waste is waste!
Our view for the Ethical investing process is “Investing shouldn’t cost the Earth”! – a simple but effective. We are building access to Ethical investment solutions as we write.
Our clients and customers are certainly aspirational …. But I have always loved hearing the stories of how very aspirational clients saved and worked tirelessly to buy household items before becoming very successful. A little more of this is needed in today’s society. (Hopefully, good habits have been transferred from our clients to their wider family).
The buy now – pay later products are a blight on society, which has been tolerated for too long! We are now seeing the collapse of pay day lenders and rent to buy white goods retailers…. Society needed a greater level of financial education – rather than exploitation!
Keeping the wheels of the economic machine driving made the vulnerable financially weaker and the strong, stronger, as they would never be caught in such a trap! It’s a fact that the more successful section of society (measured in monetary terms) are generally more prudent. A generalism maybe but a fact in our experience.
So, where are we now……?
Well, interest rates remain low and likely to remain low, inflation is low, with interest rates not protecting the buying power against inflation… over time. Employment is strong but wage inflation is weak overall, which is surprising given the employment numbers (data). There will be sectors that are under wage inflation pressure, that being said – but generally strong employment data should produce increased wage inflation, which is not developing as expected. (The general economic/political sentiment may be impacting confidence in relation to demand?). According to data in relation to the US, the ‘consumer’ remains strong but inflation is below target …. So, in our view, the consumer is less strong than required!
It was this background which Best Price FS developed a vision for and then set up – “A One Stop Financial Shop” – offering services and quality products at the Best price and value overall to consumers; providing solutions and ideas which do not require a quantum physicist to understand.
We remain with the view that products and services should be accessible to all. The irony is that we know that the well informed/perceived wealthy customer/client, uses our products and services to a greater extent than we had expected. We had thought that the insurance offerings would be the focus of the prudent (need to save money) consumer. We actually see the affluent, savvy consumer using our products to a great extent.
We (at BPFS) need to challenge ourselves more as a business to accommodate and attract the mass market, along with the affluent – of course, we want to service and support all consumers, across all demographics. It is clear that as a business and sector we must do more to attract millenial investors …. although we know they want quick clicks, more visuals and certainly less to read….!
We are building access to a wider range of products, from tax relief investment products and ethical/sustainable investing; through to simple mass market motor, home and personal insurance products. We are doing our very best to be a truly ‘one stop financial shop’ – at low cost to the UK wide financial consumer.
The techies say the 4th industrial revolution is upon us… The world of AI (Artificial Intelligence) and the deman for cleaner – more efficient energy. We are doing what we can to build a consumer driven product platform – which is likely to evolve into consumers having access to Smart Beta funds – and we are certainly developing an investment process into ethical/sustainable/ESG investing.
As a firm of advisers, we can do more than many websites, as we have regulated permissions – so we can access many products not currently displayed on our website – that may require advice. If you see a product that you like, that’s not on our website, get in touch as we are likely to be able to provide access to the product at a lower cost than you are able to broker as a consumer.
So, get in touch if you have seen a product you wish to invest in but have not see it on our website, or you wish to receive Independent Financial Advice. This may not involve buying or investing in a product, it may simply require ‘Advice’ in relation to building a strategic plan …… We can assist with this process.
We are committed to building quality solutions to our website at low cost, helping to narrow the gap by saving money when buying essential quality insurance products, such as GAP, Alloy Wheel and tyre cover, Motor Breakdown, Motor Legal Protection (ULR) and Motor Excess Cover, through to increase the awareness of the benefit of Structured Deposit Plans – where the capital is secure and protected by the FSCS Scheme for eligible investors up to £85,000, gathering returns that are high in relative terms, against the risk taken.
Best Price Financial Services are focused on saving consumers money when buying/investing into investment and insurance products, so more is retained in the pockets of our consumers.
Click the link to take you to our insurance page –
Click the link to take you to our Structured Deposit Plans –
We are working with Investec Structured Products and will shortly be identified on Moneyfacts as a distributor of Structured Deposit plans.
Structured Deposit Plans can assist the lower risk/lower capacity investor unable to suffer capital loss consumer, gather returns that are more like equity (risk) returns, while protecting the capital up to £85,000 for eligible investors via the FSCS Scheme.
We certainly feel that Structured Deposit Plans can assist with narrowing the “GAP” while providing capital protection for eligible investors via the FSCS scheme – like banking deposits.
Click the link to read a previous article written about Structured Investment Plans:
We will shortly be writing another article for our clients and consumers to read – about Structured Product (contract based) investing.
This article is not to be seen as ‘advice’ to invest. ‘Advice’ is always specific to the individual’s needs.
As always, if you have any questions simply get in touch.
Best Price FS Team