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The factors and fears holding back investors

Asset management

Financial services software house, Calastone, recently released their Global Investor Behaviours and Attitudes White Paper. It is the culmination of a survey of 1,800 people across six nations including the UK, US, Australia, New Zealand, Hong Kong and Germany, with a particular focus on ‘taking the temperature’ or retail investors.

One point that seems to be regularly missed in the hustle and bustle of investment markets is the experience of the ‘end consumer’, which has been particularly important during this year of volatility and uncertainty. The paper offers some unique insights spanning experienced and inexperienced investors of all ages. 

According to the authors, it is natural to be more cautious in times of rising uncertainty, however Australia stood out as being somewhat confused. According to the survey, Australian investors are among the most satisfied in the world, but the most anxious about the effects of COVID-19 on their financial future; this despite successfully combatting the virus. 

  • In terms of background, with the exception of Hong Kong, just half of the sample size identified themselves as proactive investors with less than a third actively investing via stocks, shares or investment funds, thereby offering insights into a nearly untouched market for managers and advisers.

    Trust remains an important issue for this cohort, with most seeking to invest for retirement rather than more immediate consumption. According to the survey around 18% of respondents had a negative view on the finance sector, but over half of millennials interviewed were broadly positive. The key drivers for the negative views were lack of trust (61%), with high fees or the perception of them (54%) and perceived limited transparency (46%) similarly important. 

    Calastone identified that visibility over the underlying investments and more straightforward access, were key drivers that would encourage respondents to investor, with some 39% responding that a free investment option would also be appreciated; explaining the success of Robin Hood and similar applications. The author’s concludes by suggesting ‘better investor education, greater focus on the customer experience and more innovative product development can stimulate broader and deeper investor engagement’

    Australia bucked the global developed market trend in many ways, in the first case both stocks and funds were similarly popular at 23% each, whereas in the US, managed or mutual funds have a clear advantage, 38% to 24%. Similarly, Australian investors have bought into the passive investment trend, with passive investments reflecting 48% of investment intentions compared to 45% for active strategies. This compares to 58% active and 39% passive across the survey group and is the closest of all the countries covered.  It isn’t all about custom mobile applications either, with at more than 50% of respondents preferring to manage their investments via a website, applications seemingly less useful at just 34%.

    One of the more unexpected results of the survey was that the ability to invest into ethical funds didn’t rank particularly high in terms of investment selection criteria. Investors were more concerned about long-term returns, fees, transparency and the firm’s reputation above over ESG and other related issues. This despite an incredible wave of marketing an ESG investment options hitting the market in recent years.

    According to Calastone, several of the findings from the study will offer hope to investment fund providers looking to increase market share but incumbents will also need to put their houses in order to fight off challenges from non-traditional competitors. They highlight that close to four in ten millennials would consider investment products from social media platforms like Facebook or Twitter, whilst as many as thirty per cent of Generation X respondents would think about purchasing investment products from supermarkets and online retailers. An incredible insight into the very difficult types of companies trusted by different generations around the world.

    Ultimately, the white paper offers hope to managers and financial advisers. By continuing to improve their accessibility, ease of understanding and engaging at a more consumer-centric level they all stand to benefit from the increasing interest in investment. 

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