Regulator sets out plan to get more people investing
The Financial Conduct Authority (FCA) said nearly 8.6 million Brits have more than £10,000 in cash and are “missing out” on investment earnings.
It wants to slash this number by 20 per cent.
The regulator has also pledged to halve the number of people investing in higher risk products that are not aligned to their needs.
Research shows that six per cent of investors increased their holdings of higher risk investments during the pandemic, with 45 per cent of self-directed investors saying they did not realise the risks.
Under the plans, the FCA has vowed to make it easier for firms to provide more help to consumers who want to invest in relatively straightforward products.
It will also review and further segment the classification of high-risk investments.
At the same time, the FCA will launch a new £11m investment harm campaign to reduce the number of people investing in inappropriate high-risk investments.
Sarah Pritchard, executive director of Markets at the FCA, said: “Investors have never had more freedom – technology has democratised the market, new products have become available, and people have better access to their life savings than before.
“But that freedom comes with risk. We want to give consumers greater confidence to invest and to help them do so safely, understanding the level of risk.
“The package of measures we have announced today are intended to support that – we want people to have greater confidence to invest. We also want to be able to adapt more rapidly to the changing market and be assertive where we see poor conduct and consumer harm.”
The FCA has also vowed to cut the amount of money lost through scams.
Consumers lost nearly £570m to investment fraud in 2020/21 – triple the amount lost in 2018.
Laura Suter, head of personal finance at AJ Bell, said: “The FCA’s plan is to get almost two million more people to invest, as its research shows 8.6 million people currently have over £10,000 investable assets in cash and it wants to reduce that by 20 per cent.
“If 1.7m people invested £10,000 in the stock market, that represents a £17bn influx of money to the investment market.”
Figures from AJ Bell show that if 1.7 million people, each with £10,000 sitting in cash, all invest their money then collectively they could make £9.8bn extra in returns over 10 years, assuming annual growth of 5 per cent.
Suter added: “For many of these individuals investing is a logical route, as they don’t need the safety of cash or immediate access to their money, but it’s often a job on the to-do list that people don’t get around to.”
Matt Connell, director of policy and public affairs for the Personal Finance Society, said: “We strongly welcome the FCA’s focus on reducing the number of consumers who are falling victim to scams and also reducing the number of customers who have too much of their wealth in cash, exposing them to inflation risk and missed opportunities for growth.
“This is a radical departure from previous regulatory approaches, which have tended to take the path of least resistance, reducing the risk of capital loss without considering lost opportunities for consumers.”