Changes in risk warnings could increase cash investments by citizens by nearly 14%, research says

New research from the Investing and Saving Alliance (TISA) and the University of Nottingham shows that providing contextually balanced risk warnings increased cash investments in stocks and shares by around 14%. Masu.

Women responded most by increasing their investments, so reformulating risk warnings could help close the gender investment gap.

This is part of a broader industry-inclusive investment campaign hosted by TISA to encourage savers to invest.

Helping people better understand the risks of investing in stocks and funds means they are more likely to invest. Participants in this study allocated approximately 14% more of their cash to investments when standard risk warnings were accompanied by additional context and graphics that made clear the benefits of the investment.

In the trial, participants were asked how they would allocate hypothetical £10,000 between cash savings, stocks and funds.

TISA found that people who were less likely to invest were most sensitive to the improved risk warnings tested. By emphasizing long-term gains, women's investments increased by 21% compared to men's 7%. This also had a stronger effect among those with low financial confidence.

TISA is calling on the industry to update perfunctory risk warnings and actually help consumers make informed decisions about the risks of their investments, in line with consumer obligations.

This research demonstrates the power of leveraging industry and academia partnerships to innovate and create better outcomes for UK consumers.

Carol Knight, CEO of TISA, said: “We urge companies to think deeply about the findings of this report and communicate more comprehensively about their investments, especially for simple products like the S&S ISA. TISA calls for action to help consumers make better-informed financial decisions about their investments within the current regulatory framework. By freeing up excess cash balances for investment, we can make households more resilient and deliver better outcomes for consumers.”

“This research increases people's readiness to invest in the stock market by more than 10%,” said Nathan Long, senior policy analyst at Hargreaves Lansdown. [and] This is truly a mic drop moment for the industry.

“Risk warnings are visible to all clients on every page of their website, but they don't receive the proper TLC to improve decision-making. They are shackled by an industry that has become more focused on over-disclosure than on improving client understanding.

“Testing can be carried out within current rules and consumer mandates encourage companies to focus on outcomes rather than inputs. Under plans to introduce support could be expensive and businesses could reduce their options to help consumers. ”

Simon Farrant, Head of Business Development at Fidelity, said: “Informing investors about the risks they are taking is an important obligation for investment firms, and we are pleased to support this initiative, which challenges conventional thinking in this area.The findings of this report, among other things, We believe that differences in responses to standard warnings for men and women will benefit both consumers and the industry. . ”

Lavanya Menon, Business Risk Director, Lloyds Banking Group, said: “This research is eye-opening and provides so much valuable insight into the barriers that people, particularly women, face when making investment choices. We've uncovered insights, and we can now leverage them as an industry to become more inclusive and help more people feel confident, informed, and reach their financial goals. You need to make them feel included.”

Peter Neufeld, Partner at EY Selen, said: “Helping people make better financial choices, both for themselves and for the most important people in their lives, is at the heart of financial well-being. I am really excited to be working with TISA.'' Members improve the way we talk about investing, giving consumers the confidence to make decisions that are right for them and have a positive impact on their future, and in the process building a more inclusive investment environment here in the UK . ”