“We must work tirelessly both to explain how investments like equities work, and to make it as simple and convenient as possible to opt for them, encouraging savers to switch gradually from cash accounts that consistently let them down. Cash is a knave not a king.”
Education needed
Carol Knight, chief operations officer at TISA, agrees it comes down to a lack of education around savings.
She says: “There is still a growing need for better education and guidance around savings and investing to enable consumers to make better decisions and understand when it is a sensible time to move from cash savings to investing.”
But the word ‘industry’ covers a lot of people, so whose responsibility is it to educate investors?
Platforms and advisers are closer to investors and therefore arguably best placed to educate them, which they do to varying degrees. Fund groups on the other hand are further removed from the process.
Laith Khalaf, senior analyst at Hargreaves Lansdown, notes it is worth bearing in mind that the vast majority of people buying an ISA now do so via a platform rather than direct with a fund management company.
“Few of the fund management groups have a lot to do with the ISA market,” he adds.
Trying to point the finger about education is perhaps a fruitless exercise, given there are several factors besides education to consider. The growth of auto-enrolment, increasing regulation, as well as media negativity on financial products and heavier taxes on buy-to-let have all played a part in making ISAs less appealing.
There is a wider issue here though, which is the simple truth that people are under saving and not investing enough. This partly comes back to weak economic growth, in particular wage growth.
